REG - Angus Energy PLC - Annual Financial Report
07/03/2023 18:00
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RNS Number : 2044S Angus Energy PLC 07 March 2023
THIS ANNOUNCEMENT CONTAINS INSIDE INFORMATION FOR THE PURPOSES OF ARTICLE 7 OF
THE MARKET ABUSE REGULATION (EU) 596/2014 AS IT FORMS PART OF UK DOMESTIC LAW
BY VIRTUE OF THE EUROPEAN UNION (WITHDRAWAL) ACT 2018 ("MAR"), AND IS
DISCLOSED IN ACCORDANCE WITH THE COMPANY'S OBLIGATIONS UNDER ARTICLE 17 OF
MAR.
7 March 2023
Angus Energy Plc
("Angus Energy", "Angus" or the "Company")
Annual Report and Accounts and Notice of Annual General Meeting
Angus Energy is pleased to announce its audited annual accounts for the year
ended 30 September 2022 (the "Accounts"), extracts of which are set out below.
In addition, the Company's 2023 annual general meeting ("AGM") will be held on
31 March 2023 at 11.00 a.m. at the offices of Fladgate LLP, 16 Great Queen
Street, London, WC2B 5DG.
The full copy of the Accounts along with the AGM Notice were posted to all
shareholders today and are also available on the Company's website,
http://www.angusenergy.co.uk/ (http://www.angusenergy.co.uk/)
END.
Enquiries:
Angus Energy Plc www.angusenergy.co.uk (http://www.angusenergy.co.uk/)
George Lucan Tel: +44 (0) 208 899 6380
Beaumont Cornish (Nomad) www.beaumontcornish.com (http://www.beaumontcornish.com/)
James Biddle/ Roland Cornish Tel: +44 (0) 207 628 3396
WH Ireland Limited (Broker)
Katy Mitchell/ Harry Ansell Tel: +44 (0) 113 394 6600
Flagstaff PR/IR angus@flagstaffcomms.com (mailto:angus@flagstaffcomms.com)
Tim Thompson Tel: +44 (0) 207 129 1474
Fergus Mellon
Aleph Commodities info@alephcommodities.com (mailto:info@alephcommodities.com)
Disclaimers - this Announcement includes statements that are, or may be deemed
to be, "forward-looking statements". These forward-looking statements can be
identified by the use of forward-looking terminology, including the terms
"believes", "estimates", "forecasts", "plans", "prepares", "anticipates",
"projects", "expects", "intends", "may", "will", "seeks", "should" or, in each
case, their negative or other variations or comparable terminology, or by
discussions of strategy, plans, objectives, goals, future events or
intentions. These forward-looking statements include all matters that are not
historical facts. They appear in a number of places throughout this
Announcement and include statements regarding the Company's and the Directors'
intentions, beliefs or current expectations concerning, amongst other things,
the Company's prospects, growth and strategy. By their nature, forward-
looking statements involve risks and uncertainties because they relate to
events and depend on circumstances that may or may not occur in the future.
Forward-looking statements are not guarantees of future performance. The
Company's actual performance, achievements and financial condition may differ
materially from those expressed or implied by the forward-looking statements
in this Announcement. In addition, even if the Company's results of
operations, performance, achievements and financial condition are consistent
with the forward-looking statements in this Announcement, those results or
developments may not be indicative of results or developments in subsequent
periods. Any forward-looking statements that the Company makes in this
Announcement speak only as of the date of such statement and (other than in
accordance with their legal or regulatory obligations) neither the Company,
nor the Bookrunner nor Beaumont Cornish nor any of their respective
associates, directors, officers or advisers shall be obliged to update such
statements. Comparisons of results for current and any prior periods are not
intended to express any future trends or indications of future performance,
unless expressed as such, and should only be viewed as historical data.
Beaumont Cornish Limited, which is authorised and regulated in the United
Kingdom by the Financial Conduct Authority, is acting as nominated adviser to
the Company in relation to the matters referred herein. Beaumont Cornish
Limited is acting exclusively for the Company and for no one else in relation
to the matters described in this announcement and is not advising any other
person and accordingly will not be responsible to anyone other than the
Company for providing the protections afforded to clients of Beaumont Cornish
Limited, or for providing advice in relation to the contents of this
announcement or any matter referred to in it.
Contents
Officers and
Advisors
(#_TOC_250004) 2
Chairman's Statement
4 (#_TOC_250003)
Strategic
Report
6
Corporate Governance
Statement
(#_TOC_250002) 18
Audit Committee Report
25
Directors' Remuneration Report
27
Board of
Directors
29
Directors'
Report
(#_TOC_250001) 30
Statements of Directors'
Responsibilities 31
Stakeholder
Engagement
(#_TOC_250000) 34
Independent Auditor's
Report 38
Consolidated Statement of Comprehensive
Income 45
Consolidated Statement of Financial Position
46
Consolidated Statement of Changes in
Equity 47
Consolidated Statement of Cash
Flows 48
Notes to the Consolidated Financial
Statements 49
Company Statement of Financial Position
79
Company Statement of Changes in
Equity
80
Notes to the Company Financial
Statements
81
Officers and Advisors
Directors
George Lucan (Chief Executive Officer) Patrick Clanwilliam (Non-Executive
Chairman) Carlos Fernandes (Finance Director)
Andrew Hollis (Technical Director)
Cameron Buchanan (Non-executive Director, resigned 4 October 2022) Paul
Forrest (Non-Executive Director, appointed 18 July 2022) Krzysztof Zielicki
(Non-Executive Director, appointed 4 October 2022) Richard Herbert
(Non-Executive Director, appointed 24 January 2023)
Secretary
Carlos Fernandes
Registered Office Building 3, 566 Chiswick Park Chiswick High Road
London W4 5YA
Nominated Advisor Beaumont Cornish Limited Building 3, 566 Chiswick Park
Chiswick High Road
London W4 5YA
Brokers
WH Ireland Group plc 24 Martin Lane London
EC4R 0DR
Auditor Crowe U.K. LLP 55 Ludgate Hill London
EC4M 7JW
Solicitor
Fladgate LLP
16 Great Queen Street London
WC2B 5DG
Principal Bankers HSBC Holdings Plc PO Box 10
59 Old Christchurch Road Bournemouth
Dorset BH1 1EH
Barclays Bank Plc Leicester Leicestershire LE87 2BB
Registrars
Share Registrars Limited 27/28 Eastcastle Street London
W1W 8DH
Chairman's statement
Dear Fellow Shareholders,
It is my pleasure to present you with the Annual Report of Angus Energy plc
(the "Company" or "Angus Energy") with its subsidiary undertakings (the
"Group") for the year ended 30 September 2022.
It's been another busy year for Angus, with the acquisition of Saltfleetby
Energy Limited that culminated with first gas from Saltfleetby delivered at
the end of August 2022. With the completion of the onsite processing
facilities, the Company has enjoyed several months of steady gas production.
With oil and gas prices looking to remain high for the foreseeable future,
Angus will look to maximise its portfolio by turning its attention to the
evaluation of the Southern Lobe at Saltfleetby which has a further 20 BCF of
2C contingent resources. Geologically the Saltfleetby gas field also has great
gas storage potential. Energy security is high on the Governments agenda and
we will continue to work with all stakeholders to assess the viability of
storage opportunities either now or at the end of field life. The Company will
focus on resuming production from its oil assets.
Angus remains focused on the energy transition narrative and as such will
accelerate its geothermal developments which is targeted on the acquisition
and origination of new further gravimetric data, and toward a seismic program,
in the south west of England.
Financial and Statutory Information
Revenue from oil and gas production during the year is £3.142m (2021: NIL) on
production of a gross 1,378 bbls of oil and 1,273,994 Therms of natural gas
(2021: NIL). This was the result of resuming production from the Brockham Oil
Field and at the Saltfleetby Gas Field.
The Group recorded a loss of £111.947m, which included a derivative loss of
£110.309m in relation to the derivative instrument, resulting in an adjusted
operating loss of £1.638m (2021: loss of £2.455m). The derivative loss is
based on future production and calculated using forward gas prices as at 30
September 2022. The derivative will be realised to a profit or loss when the
payments under the derivative instruments become due (see note 25).
During these difficult economic times, the Company has continued to make a
conscious effort to cut costs at both corporate and operational levels while
still maintaining high level of professionalism and operatorship. In line with
starting gas production the administrative costs have increased by £0.701m to
£2.619m (2021: £1.918m).
Outlook
With gas production at Saltfleetby increasing the Company looks forward to
positive cashflows for the year ahead.
The Board will focus on maximizing the potential from our existing portfolio,
including its geothermal projects and accelerate its evaluation of new
projects to complement production from Saltfleetby.
Patrick Clanwilliam
Chairman
7 March 2023
Operating Review
On 30 August 2022, Angus successfully exported its first commercial sales gas
from Saltfleetby Gas Field to the national grid. In December 2022, Angus
instructed Oil Field International ("OIL") to review the early performance of
the Saltfleetby gas reservoir since production was restarted on 25th August
2022, after a five-year shut in. We requested that OIL consider whether in
light of this new information, the gross reserves and forecast production
profiles contained in OIL's CPR of Effective Date October 1st, 2021 were still
valid.
Despite the delays to installing the second compressor and the drilling of
SF7, OIL concluded there is no reason to modify the sales gas production
profiles or gross gas reserves as reported in October 2021.
Table 1 Sales Gas Production August 30th to Dec 7th, 2022 (from two wells)
Avg Sales Gas Flowrate Recorded Gas Sales for first 100 days
Month CV
MMSCFD MM Th MMSCF BTU/SCF
2 Wells on production during period
Aug 30-31 2022 0.6 0.01 1 1107
Sep-22 3.8 1.26 115 1099
Oct-22 5.4 1.86 168 1104
Nov-22 6.0 1.99 180 1107
Dec 1-7 2022 5.8 0.45 40 1106
Total 100 days 5.04 5.56 504 1104
The drilling of the SF7v sidetrack at the Saltfleetby Field has now concluded,
reaching a total measured depth of 2746 meters in the Westphalian 1D
reservoir. The well bore has been secured with 4.5" liner to that depth,
slotted across the reservoir. Completion operations have commenced.
Following the setting of the well completion production tubing, well cleanup
operations will be conducted in the middle of March once coiled tubing
equipment becomes available. Flow testing will follow shortly afterward and,
assuming coiled tubing services are available at the scheduled date, the
additional flow from this well should be available for export from 1 April.
The Company will announce results of the flow test once complete.
The Company is confident from the electric logging, mud logging and gas shows
in the reservoir section that the well will be a successful producer.
Furthermore, the well is drilled alongside and replicates what was previously
the best producing well in the field.
Wet commissioning of the second compressor began at the end of February and we
expect successful full running in the coming days and are confident that the
unit will be available for duty well before 1 April.
In October 2021 we published the results of the revised Competent Persons
Report for the Saltfleetby Gas field, which reflected the higher revenues
expected from the field.
The CPR, performed by Oilfield International Limited, gives the net present
value of the cash flows from the Saltfleetby Gas Field, including the impact
from the revised capex, the loan facility debt service costs, the associated
royalties and the mandatory hedging. Oilfield International Limited has used a
conservative discount rate of 10%. Presenting 100% of the field values:
· A conservative case, or P90, NPV10 of £63.3 million (Pre-Tax)
· A mid-case, or P50, NPV10 of £95.6 million (Pre-Tax)
Alternatively expressed as estimates of net future cashflows, but without
discounting, can be summarised as follows:
· A conservative or P90 sum of future cashflows to Angus of £82
million (Pre-Tax)
· A mid-case, or P50, sum of future cashflows to Angus of £147.7
million (Pre-Tax)
In summary the CPR estimates production giving rise to gross field revenues,
before costs etc. on a mid-case basis of £230 million (previously £141
million). This approximates to a gas price of 64p/therm being a mix of the
actual volumes already hedged at 43p/therm and the remaining unhedged volumes
accorded prices derived from the quoted and traded NBP forward curve to
December 2026 and thereafter escalated by 1.5% per annum. The gross volume of
reported Gas Reserves is unchanged.
The full report is available on the Company website under Presentations at the
following link
https://www.angusenergy.co.uk/wp-content/uploads/2021/10/Angus-Energy-Saltfleetby-
(https://www.angusenergy.co.uk/wp-content/uploads/2021/10/Angus-Energy-Saltfleetby-Reserves-Valuation-Report.pdf)
Reserves-Valuation-Report.pdf
(https://www.angusenergy.co.uk/wp-content/uploads/2021/10/Angus-Energy-Saltfleetby-Reserves-Valuation-Report.pdf)
.
(https://www.angusenergy.co.uk/wp-content/uploads/2021/10/Angus-Energy-Saltfleetby-Reserves-Valuation-Report.pdf)
Under the heading "Review of activities" below we provide a more in-depth
summary of operational activities. I again repeat my statement of last year
that our first concern as a Group must be for the safety of our staff,
contractors, the public at large and the environment on which we rely on. It
is with pleasure that I report that all operations were performed without any
safety incidents or environmental damage. We will continue to work in close
co- operation with all of our regulators, ensuring a spotless record of
compliance - the North Sea Transition Authority ("NSTA"), the Environment
Agency ("EA") the Health and Safety Executive ("HSE") and our local councils.
Business Review
The principal activity of the Group during the year continued to be on-shore,
conventional production and development of hydrocarbons in the UK.
Review of activities
Saltfleetby
In August 2022, the Company had completed the installation of the onsite
processing facilities and the first compressor. With all the necessary NSTA,
EA and HSE permissions in place, commissioning of the Saltfleetby Gas Field
commenced, with first sales gas exported to the national grid on 30 August
2022.
Spudding of the SF7 sidetrack began on 28 October 2022 and completed on 28
February 2023. The sidetrack reached a measured depth of 2,746 meters in the
Westphalian 1D reservoir. Wet commissioning of the second compressor began the
week commencing 20 February 2023 and we expect successful full running in the
coming days and are confident that the unit will be available for duty well
before 1 April 2023.
The Company also hedged approximately 50% of the Company's share of future gas
sales, estimated under a conservative projection, for three years beginning in
July 2022. The average achieved price under the Hedge, including all fees,
costs and charges is 43 pence per therm. Since entering into the Hedge
agreements, we have seen a significant increase in gas prices. As previously
announced, the Hedged limits were set at 50% of our estimated gas production
leaving the Company with enough headroom to comfortably meet the requirements
under the Hedge whilst still enjoying unhedged production.
Geothermal
During the year the Company continued to progress its ambitions of becoming a
low-cost UK producer of baseload geothermal power. Based on the acquired land
gravity and radiometrics as well as the desk top study on overall project
economics the company has produced a detailed Geothermal Development Plan.
The Geothermal Development Plan is split over 2 focused areas, with each
area's work program broken down into 4 Phases. The program kicks off with
further 2D/3D gravity and heat flow modelling, a comprehensive seismic survey,
shallow drilling and finally a third party Feasibility Study.
Phase 1 is slated to commence in H1 2023 with the work to include date review
and processing, structural mapping, depth estimation and heat flow analysis.
Balcombe
Following the initial 7 day well test in the Autumn of 2018, a planning
application was submitted in late 2019 for a longer 3 year well test on the
Balcombe 2Z well. The aim of the planned operation is to recover remaining
drilling fluids to prepare the well for an extended well test. A long term
extended well test will indicate to what degree the well and field can produce
hydrocarbons at a commercial rate.
However, in early 2020 the planning officer recommended the application for
refusal and the company withdrew the application before committee stage. A
revised application for 12 months extended well test was then submitted to
WSCC, including a wealth of information on socio economic benefits and the
projects' alignment with the public interest case for oil in terms of energy
security and benefit to the national economy from indigenous production.
The Planning Officer recommended the application for approval, but despite
this the Planning Committee Meeting held on Tuesday 2 March 2021, decided
against the application. They refused the application on the grounds that
there are no exceptional circumstances, and that it is not in the public
interest for the development to continue in the area and was this in contrary
to clauses in both the West Sussex and National Planning Policy Framework.
Angus strongly disagreed with their opinion and an application to appeal had
been submitted. Amongst other things, the appeal references the local and
national planning policies referred to by the Planning Committee and why both
Angus and the Planning Officer believe the development is acceptable when it
is considered against the development plan and any relevant material
considerations. In summary the principle of the development has been
previously accepted, the site selection represents the best environmental
option and is safeguarded, energy Policy states that the domestic oil and gas
industry has a critical role in maintaining the country's energy security and
is a major contributor to our economy and minerals are given great weight with
the extraction of hydrocarbons seen as central to the UK energy policy in the
immediate and long-term future.
On 14 February 2023, our appeal against the decision by West Sussex County
Council to refuse permission for an extended well test at the Balcombe oil
site was upheld. As a consequence of the decision by the Planning
Inspectorate, the Company is now capable of pursing this well test subject to
satisfaction of planning conditions noted in the Appeal Decision as well as
the determination of the variation to the Environmental Permit by the
Environment Agency which we understand to be imminent.
Lidsey
The Company carried out work to reprocess and reinterpret the Lidsey seismic
data. One
of the conclusions of the work was that previous seismic mapping both
underestimated the aerial extent of the reservoir and most importantly its
shape. The Company therefore acquired a new line of seismic data and reprocess
the existing seismic lines.
The Company's seismic reinterpretation of the Lidsey field was completed and,
having been subject to rigorous third party verification. This is the last
part of the most comprehensive review of the Lidsey structure ever carried out
and includes the reprocessing of all historical seismic lines, the use of a
newly acquired east-west seismic line over the field and the data from both
the wells on the field and also nearby wells.
This remapping has resulted in some further changes to the shape of the
structure, but it now fits and is consistent with all of the available data.
The Company is confident that the new field mapping explains the issues which
were experienced with the Lidsey X2 well in 2017. It is now the Directors'
clear belief that the structure culminates near the wellsite area and
extends to the east and northeast. Prior to the drilling of Lidsey X2, it was
thought that the structure extended to the west and the westerly trajectory of
the Lidsey X2 well accordingly targeted an area close to the edge of the
structure.
The new mapping shows there to be a significant structure not dissimilar in
area to the original structure considered by the previous Competent Person's
Report, which continues to support a commercially significant estimate of oil
in place. However, the interpretation does allow Angus to narrow its field of
focus in target selection and explore low-cost options for remediation of the
field's productivity center around the reuse, workover or side-tracking of the
existing wells and these will be considered with our partners in the next
stage of the work.
The Company's re-mapping of the structure also shows it to extend a
significant distance out of the licence area in some scenarios and Angus is
now opening a dialogue with the holder of that surrounding licence to consider
how we might proceed together to address the future of the field.
Brockham
The Group continued with its plan to obtain commercial value from the licence
by resuming production from the Portland reservoir. An application to the
Environment Agency for permission to re-inject formation water to maintain
pressure in that reservoir to gain maximum hydrocarbon recovery was submitted
which included an updated Hydrogeological Risk Assessment. The Environment
Agency had completed their determination of the permit variation and the
permit was issued on 02 March 2022.
A Field Development Plan was also submitted to this effect to the NSTA which
was approved. Recompletion of the BR X4Z well as a Portland producer is slated
for the end of Q2 2023 which will increase production to circa 150 bopd.
Strategy and Sustainability
The Directors' objective remains unchanged, to create long term value for
shareholders by building the Group into a profitable energy production company
with a reputation for technical excellence but with great cost discipline. The
Director's will continue to focus on the UK onshore but do not rule out
acquisitions overseas in jurisdictions where the rule of law is strong. We
understand the energy requirements and infrastructure constraints, combined
with a development plan based on fundamentals, can lead to sustainable and
profitable opportunities for investors. As such we are constantly reviewing
potential projects that will complement our existing core skills and portfolio
of assets.
From the point of view of sustainability, the Directors are aligned with the
national energy objectives and look forward with enthusiasm to the
opportunities ahead in the common goal of net zero. Whilst we will continue to
win a return from legacy oil fields, the preference remains for the
acquisition of gas assets, but the company has widened the net to included
sustainable energy projects. One such example is our Deep Geothermal Project,
which provides the baseload generation which wind and solar cannot do without
and contains many innovative, risk reducing elements for partners and
investors alike.
Global Environment and Stewardship
As a Group we do have duties of stewardship to the wider environment of which
we are acutely aware. At Angus we realise there needs to be significant
improvement in the Energy Mix and the transition begins with the proper
operation of the existing energy assets and the responsible development of new
ones. We understand hydrocarbons are still needed but must be produced to the
highest ESG standards.
When it comes to our existing operations or evaluating potential new projects,
we are always focused on creating the least possible impact to the
environmental.
Local Environment
As a responsible North Sea Transition Authority ("NSTA") approved and
Environment Agency ("EA") permitted UK operator, Angus Energy is committed to
utilising industry best practices and achieving the highest standards of
environmental management and safety. Our operations:
· Continuously assess and monitor environmental impact
· Promote internally and across our industry best practices for
environmental management and safety
· Constant attention to maintaining our exemplary track record of safe
oil and gas production
There were no reportable health and safety incidents during the year.
Community
Angus Energy seeks and maintains positive relationships with its local
communities. We achieve this through our various forms of communication which
include community liaison meetings, social media updates, RNS's and Investor Q
& A sessions.
In general, we are guided by the following principles:
· Open and honest dialogue
· Engagement with stakeholders at all stages of development
· Proactively address local concerns
· Actively minimise impact on our neighbours
· Adherence to a strict health and safety code of conduct
On 4 June 2018, the Group established the Bruce Watt Memorial Scholarship, a
yearly scholarship fund of £10,000 per year to support students from Bognor
Regis and the surrounding community to undertake further academic studies
beyond secondary school. Currently there have been 10 recipients of the
Scholarship award.
Section 172 Statement
Under Section 172, Directors have a duty to promote the success of the Company
for the benefit of the members as a whole and, in doing so, they should have
regard to specified areas that relates, by and large, to wider stakeholder
interest. Further details of these areas have been enumerated in Stakeholders
Engagement section on page 33.
Financial Review
The Group began the period with the following interests: 80% of Brockham
(PL235), 80% of Lidsey (PL241), 25% of Balcombe (PEDL244) and 51% of
Saltfleetby Gas Field (PEDL005).
The Group had a cash balance of £6.160m as at 30 September 2021.
During the period, the Company issued 897,748,245 ordinary shares for cash,
raising gross proceeds of £8,825,000. Please refer to note 17 for a detailed
breakdown.
During the period the Company also issued 3,461,538 at 0.65 pence per share,
8,750,000 at
0.8 pence per share, 5,555,555 at 0.9 pence per share, 20,250,000 at 1 pence
per share,
3,068,182 at 1.1 pence per share, 61,398,568 at 1.2 pence per share,
30,462,639 at 1.35 pence per share, 29,341,672 at 1.5 pence per share and
18,025,597 at 1.663 pence per share. They were issued in relation to an
exercise of Company Warrants. Please refer to note 18 for a detailed
breakdown.
On 20 October 2021, the Company agreed an extension of the £1.4m Convertible
Loan Note repayable on 17 April 2022 by a further 12 months until 17 April
2023. The Note, which was otherwise convertible at 1p per ordinary share from
17 February 2022, will now only be convertible at the earliest of 17 July 2022
representing a six month extension. Additionally, the Company retains the
right to repay the Note at any time with the additional grant of warrants at
1.3p per share as detailed in the RNS of 20 April 2020. All other terms of the
Note remained the same. In consideration for this extension. On 4 November 21,
the Company issued and allot to the Noteholder 11,200,000 ordinary shares.
On 16 March 2022, the company issued 39,200,000 ordinary shares at 0.8 pence
per share. The shares were used to settle litigation with a financial provider
(not being the Company's broker or Nomad) in dispute relating to the
Saltfleetby Loan Facility.
On 24 May 2022, the Company executed a share purchase agreement to acquire the
entire issued share capital of Saltfleetby Energy Limited from Forum Energy
Services Limited, giving the Company 100% ownership of the Saltfleetby Gas
Field. The total effective consideration payable pursuant to the SPA is the
sum of £14,052,000.
On 24 May 2022, the company issued 91,000,000 ordinary shares at 1.0989 pence
per share. These were consideration shares paid for the acquisition of
Saltfleetby Energy Limited.
On 24 May 2022, and in relation to the acquisition of Saltfleetby Energy
Limited, the Company issued 546,000,000 ordinary shares at 1.2 pence per
share.
On 24 May 2022, and in relation to the acquisition of Saltfleetby Energy
Limited, the Company issued 273,000,000 ordinary shares at 1.0989 pence per
share, raising gross proceeds of
£3,000,000.
On 24 May 2022, the Company issued 5,000,000 ordinary shares at 0.9429 pence
per share. The shares were issued to the Lenders or their representatives in
lieu of a cash facility fee pursuant to the Company's Saltfleetby Loan
Development Facility at or around the first anniversary of the Loan
Completion.
On 12 July 2022, the Company issued 27,300,000 ordinary shares at 1.0989 pence
per share. The shares were fee shares relating to the Direct Subscription and
acquisition of Saltfleetby Energy Limited.
The Group had cash balance of £0.747m at the end of reporting year.
The Group generated £3.142m revenue from oil and gas production during the
year (2021: NIL).
The Group recorded a loss of £111.947m which included a derivative loss of
£110.309m in relation to the derivative instrument, resulting in an adjusted
loss of £1.638m (2021: loss of
£2.455m). The derivative loss is based on future production and calculated
using forward gas prices as at 30 September 2022. The derivative will be
realised to a profit or loss when the payments under the derivative
instruments become due (see note 25). For the year under review, the
administrative costs increased by £0.701m to £2.619m (2021: £1.918m).
The Group's overall financial objectives are to increase revenue, return to
profitability and enhance the asset base supporting the business. In order to
monitor its progress towards achieving these objectives, the Group has set a
number of key performance indicators, which deal predominately with revenue,
profitability, margin and cash flow as above.
Governance, Compliance and Shareholder Relations
The Board consists of a Chief Executive, Finance and Technical Director
supervised by three experienced non-executive Directors. The Board which meets
regularly alongside with AIM Rules Committee meeting, Remuneration Committee
and Audit Committee meetings.
In general, the management structure is very flat. In total we have 23
employees, including management. The Company also relies on third party
experienced contractors.
We have appointed three compliance officers to deal with all our regulators
and planning authorities which are presently Surrey, Lincolnshire and West
Sussex County Council, the Oil & Gas Authority, the Environment Agency and
the Health & Safety Executive. Additionally, as a publicly listed company,
we are answerable to the AIM Market Division and to the Financial Conduct
Authority.
Compliance is an area which has grown more complicated and expensive in recent
years and we expect it to get more so. Regulators are being more pro-active
and pre-emptive, and we
must anticipate their needs and expectations better than we have in the past.
We should aim to maintain better dialogue with all regulators and planners and
engage in more frequent use of pre-approval procedures where they are
available.
Principal risks and uncertainties Currency risks
The Group sells its produced crude oil and gas; oil is priced in US dollars
and gas is priced in UK pounds, whilst the bulk of its costs are in GBP and
therefore the Group's financial position and performance will be affected by
fluctuations in the US dollar, sterling exchange rate along with fluctuations
in the oil price. Accordingly, the value of such transactions may be adversely
affected by changes in currency exchange rates, which may have a material
adverse effect on the business, financial condition, results of operations and
prospects of the Group. Management regularly reviews currency exposure with
the aim of mitigating any downside exposure where possible.
Market risk
The demand for, and price of, oil and gas are highly dependent on a variety of
factors beyond the Group's control. The continued marketing of the Group's oil
and gas will be dependent on market fluctuations and the availability of
processing and refining facilities and transportation infrastructure,
including access to roads, train lines and any other relevant options at
economic tariff rates over which the Group may have limited or no control.
Transport links (including roads and pipelines) may be inadequately maintained
and subject to capacity constraints and economic tariff rates may be increased
with little or no notice and without taking into account producer concerns.
Producers of oil and gas negotiate sales contracts directly with oil and gas
purchasers, with the result that the market determines the price of oil and
gas. The price depends in part on oil and gas quality, prices of competing
fuels, distance to market, the value of refined products and the supply/demand
balance. The marketability and prices of oil and gas that may be discovered or
acquired by the Group will be affected by numerous factors beyond its control.
The Group has entered into commodity derivatives for its gas product to
protect it from any downside market risk (see note 25 for further details).
Permitting risk
The Group exposed to the planning, environmental, licensing and other
permitting risks associated with its operations particularly with exploration
drilling operations.
The Group has to date been successful in obtaining the required permits to
operate. Therefore, the Group considers that such risks are mitigated through
compliance with regulations, proactive engagement with regulators, communities
and the expertise and experience of the management team.
Reserve and resource estimates
No assurance can be given that hydrocarbon reserves and resources reported by
the Group in the future are present as estimated, will be recovered at the
rates estimated or that they can be brought into profitable production.
Hydrocarbon reserve and resource estimates may require revisions and/or
changes (either up or down) based on actual production experience
and in light of the prevailing market price of oil and gas. A decline in the
market price for oil and gas could render reserves uneconomic to recover and
may ultimately result in a reclassification of reserves as resources. Unless
stated otherwise, the hydrocarbon reserve and resources data relating to
Lidsey and Brockham contained in the financial statements are taken from the
Competent Person's Report, at the time of AIM admission on 14 November 2016
and the hydrocarbon reserve and resources data relating to Saltfleetby are
taken from the Saltfleetby Competent Person's Report published in October
2021.
There are uncertainties inherent in estimating the quantity of reserves and
resources and in projecting future rates of production, including factors
beyond the Group's control. Estimating the amount of hydrocarbon reserves and
resources is an interpretive process and, in addition, results of drilling,
testing and production subsequent to the date of an estimate may result in
material revisions to original estimates.
The hydrocarbon resources data extracted from the Competent Person's Report
are estimates only and should not be construed as representing exact
quantities. The nature of reserve quantification studies means that there can
be no guarantee that estimates of quantities and quality of the resources
disclosed will be available for extraction. Therefore, actual production,
revenues, cash flows, royalties and development and operating expenditures may
vary from these estimates. Such variances may be material. Reserves estimates
are based on production data, prices, costs, ownership, geophysical,
geological and engineering data, and other information assembled by the Group
(which it may not necessarily have produced).
The estimates may prove to be incorrect and potential investors should not
place reliance on the forward-looking statements (including data included in
the Competent Person's Report or taken from the Competent Person's Report and
whether expressed to have been certified by the Competent Person or otherwise)
concerning the Group's reserves and resources or production levels.
Hydrocarbon reserves and resources estimates are expressions of judgment based
on knowledge, experience and industry practice. They are therefore imprecise
and depend to some extent on interpretations, which may prove to be
inaccurate. Estimates that were reasonable when made may change significantly
when new information from additional analysis and drilling becomes available.
This may result in alterations to development and production plans which may,
in turn, adversely affect operations. If the assumptions upon which the
estimates of the Group's hydrocarbon resources have been based prove to be
incorrect, the Group (or the operator of an asset in which the Group has an
interest) may be unable to recover and produce the estimated levels or quality
of hydrocarbons set out in this document and the Group's business, prospects,
financial condition or results of operations could be materially and adversely
affected.
Events after the reporting period
The Group had a cash balance of £0.747m as at 30 September 2022 subsequent to
the significant cash movements described during the reporting period.
On 13 October 2022, the Company issued 127,400,127 ordinary shares at 1.0989
pence per share. They were issued in relation to the exercise of Company
Warrants.
On 24 October 2022, the Company agreed the grant of 165.5 million share
options under the Company's existing Employee Incentive Scheme to Directors
and other staff. The share options have an exercise price of 2 pence per share
(being a premium of 23% to the closing price on 21 October 2022) and vest as
to 100 per cent., upon the closing mid‐market price of the Ordinary Shares
being 3 pence or above (being 50 per cent. above the Exercise Price. The
options have a 4 year term from the date of issue.
On 28 October 2022, the Company issued 10,193,759 ordinary shares at varying
prices of 1.0989 pence per share, 1.2 pence per share, 1.35 pence per share
and 1.5 pence per share. They were issued in relation to the exercise of
Company Warrants.
On 02 November 2022, the Company issued 36,599,864 ordinary shares at 1.0989
pence per share. They were issued in relation to the exercise of Company
Warrants.
On 21 November 2022, the Company issued 312,000 ordinary shares at varying
prices of 1.35 pence per share and 1.5 pence per share. They were issued in
relation to the exercise of Company Warrants.
On 8 December 2022, the Company issued 500,000 ordinary shares at varying
prices of 1.2 pence per share, 1.35 pence per share and 1.5 pence per share.
They were issued in relation to the exercise of Company Warrants.
On 19 December 2022 the Company announced that it had successfully raised
gross proceeds of approximately £7 million by means of a placing to certain
institutional and other investors to raise approximately £2 million, (the
"Placing") and a direct subscription to raise approximately £5 million (the
"Subscription") (together, the "Fundraising"), in each case at a price of 1.65
pence per share (the "Fundraising Price").
The Fundraising was conducted in two tranches, with the initial tranche of new
Ordinary Shares under the Fundraising (comprising in aggregate 341,219,000
Ordinary Shares, being the shares issued under the Placing and 226,219,000
shares issued under the Subscription) being issued under the Company's
pre-existing share capital authorities, and the second tranche of 89,781,000
new Ordinary Shares ("Conditional Subscription"), together with 311,250,000
warrants in respect of the entire Fundraising ("Warrants"), being subject to
shareholders passing the certain resolutions ("Resolutions") at a General
Meeting ("GM").
In addition, and conditional upon the passing of the Resolutions, Forum Energy
Services Ltd ("Forum") has agreed to accept the allotment and issue of
60,606,061 new Ordinary Shares (the "Forum Share Issue") at the Fundraising
Price (together with the issue of 30,303,030 warrants on the same basis as
applicable to the Fundraising ("Forum Warrants")) in settlement of the
Company's obligation to pay certain deferred consideration of £1,000,000 to
Forum in accordance with the Saltfleetby SPA as announced on 24 May 2022.
As announced on 2 March 2023, the Board resolved to make the following
changes, subject to final terms being agreed:
Richard Herbert has agreed to assume the role of Chief Executive Officer in
charge of day to day management of the Company and responsibility for the
ongoing development of the management team. Richard's background at the helm
of independent oil and gas companies, such as Frontera Energy, combined with
his experience as Head of Exploration at BP, his particular experience in the
UK onshore makes him the ideal candidate for strengthening the execution of
the Company's strategy. George Lucan will take up the role of Executive
Chairman with particular responsibility for stakeholder and governmental
relations and strategic direction. Andrew Hollis will remain Technical
Director of the Company but will be stepping down from his Board
responsibilities. Paddy Clanwilliam will step down as Non- Executive Chairman
to become Senior Independent Non-Executive Director, alongside Krzysztof
Zielicki, who remains our second Independent Non-Executive Director.
Outlook
With production at Saltfleetby increasing, the Company looks forward to
achieving positive operational cashflow. The Company will continue to explore
further gas opportunities and mature its geothermal projects in the south west
of England with the intention of not only creating shareholder value but also
to address the urgent need for transition energy projects.
Approved by the Board of Directors and signed on behalf of the Board.
George Lucan Managing Director 7 March 2023
Details of all our assets and operations can be found at www.angusenergy.co.uk
(http://www.angusenergy.co.uk/)
Corporate Governance Statement
The Directors recognise that good corporate governance is a key foundation for
the long term success of the Group. The Company is listed on the AIM market of
the London Stock Exchange and is subject to the continuing requirements of the
AIM Rules. The Board has therefore adopted the principles set out in the
Corporate Governance Code for small and mid-sized companies published by the
Quoted Companies Alliance ("QCA Code"). The principles are listed below with
an explanation of how the Company applies each principle, and the reasons for
any aspect of non-compliance.
1. Establish a strategy and business model which promotes long-term value for shareholders
Angus Energy Plc provides shareholders with a full discussion of corporate
strategy within our Annual Report. A dedicated section explains how we will
establish long term shareholder value, as set out on page 10.
The Company is focused around 3 key strategic goals:
· increase production and recovery from its existing asset portfolio;
· grow the asset portfolio through select onshore development and
appraisal projects;
· actively manage costs and risks through operational and management
control of the entire process of exploring, appraising and developing its
assets.
The Management team actively evaluates projects that simultaneously de-risk
the current portfolio and create long term shareholder value. Projects are
evaluated based on many characteristics to mitigate risk to our current
activities. They include, but are not limited to, alignment with the Company's
core competencies, geography, time horizon and value creation. Further, a core
component of the Company's activities includes an active dialogue with our
legal and legislative advisors to ensure the Company remains up to date on
current legislation, policy and compliance issues.
The key challenges to the business and how they may be mitigated are detailed
in the Strategic Report on pages 6 to 17.
2. Seek to understand and meet shareholder needs and expectations
Angus Energy encourages two-way communication with institutional and private
investors. The Group's major shareholders maintain an active dialogue to and
ensure that their views are communicated fully to the Board. Where voting
decisions are not in line with the company's expectations the Board will
engage with those shareholders to understand and address any issues. The
Company Secretary is the main point of contact for such matters.
The Company seeks out appropriate platforms to communicate to a broad audience
its current activities, strategic goals and broad view of the sector and other
related issues. This includes but is not limited to media interviews, website
videos in-person investor presentations and written content.
Communication to all stakeholders is the direct responsibility of the Senior
Management team. Managers work directly with professionals to ensure all
inquiries (through established channels for this specific purpose such as
email or phone) are addressed in a timely manner and that the Company
communicates with clarity on its proprietary internet platforms. Senior
management routinely provides interviews to local media, and business
reporters in support of the company's activities. The Board routinely reviews
the Company communication policy and programmes to ensure the quality
communication with all stakeholders.
3. Take into account wider stakeholder and social responsibilities and their implications for long term success
In all endeavours, the Company gives due consideration to the impact on its
neighbours. The Company seeks out methodologies, processes and expertise in
order to address the concerns of the non-investment community. As such, it
actively identifies the bespoke needs of local communities and their
respective planners.
For example, the company provides for local hotlines and establishes community
liaison groups to address local questions and concerns.
Angus Energy seeks to maintain positive relationships within the communities
it operates in. As such, Angus Energy is dedicated to ensuring:
• Open and honest dialogue;
• Engagement with stakeholders at all stages of development;
• Proactively address local concerns;
• Actively minimise impact on our neighbors; and
• Adherence to a strict health and safety code of conduct
As a responsible OGA approved and EA permitted UK operator, Angus Energy is
committed to utilising industry best practices and achieving the highest
standards of environmental management and safety.
Our operations:
• Continuously assess and monitor environmental impact;
• Promote internally and across our industry best practices for
environmental management and safety; and
• Constant attention to maintaining our exemplary track record of safe
oil and gas production.
The Company has also established a scholarship programme for community
residents seeking secondary or further education.
For more information please refer to the page 11 of the Annual Report as well
as the
Community section within the Company's corporate website.
4. Embed effective risk management, considering both opportunities and threats, throughout the organization
Risk Management in the Strategic Report details risks to the business, how
these are mitigated and the change in the identified risk over the last
reporting period.
The Board considers risk to the business at every Board meeting (at least 8
meetings are held each year) and the risk register is updated at each meeting.
The Company formally reviews and documents the principal risks to the business
at least annually.
Both the Board and senior managers are responsible for reviewing and
evaluating risk and the Executive Directors meet at least monthly to review
ongoing trading performance, discuss budgets and forecasts and new risks
associated with ongoing trading.
5. Maintain the Board as a well-functioning, balanced team led by the chair
Oversight of Angus Energy is performed by the Company's Board of Directors.
Patrick Clanwilliam, the acting Non-Executive Chairman, is responsible for the
running of the Board and George Lucan, the Chief Executive Officer, has
executive responsibility for running the Group's business and implementing
Group strategy. All Directors receive regular and timely information regarding
the Group's operational and financial performance. Relevant information is
circulated to the Directors in advance of meetings. In addition, minutes of
the meetings of the Directors of the main UK subsidiary are circulated to the
Group Board of Directors. All Directors have direct access to the advice and
services of the Company Secretary and are able to take independent
professional advice in the furtherance of the duties, if necessary, at the
company's expense.
The Board comprises of three Executive Directors and three Non-Executive
Directors with a mix of significant industry and business experience within
public companies. The Board considers that all Non-executive Directors bring
an independent judgement to bear. All Directors must commit the required time
and attention to thoroughly fulfil their duties.
The Board has a formal schedule of matters reserved to it and is supported by
the Audit, Remuneration, Nomination and AIM Rules compliance committee. The
Schedule of Matters Reserved and Committee Terms of Reference are available on
the Company's website and can be accessed on the Corporate Governance page of
the website.
6. Ensure that between them the directors have the necessary up-to-date experience, skills and capabilities
The nomination committee will determine the composition of the Board of the
Group and appointment of senior employees. It will develop succession plans as
necessary and report to the Directors. Where new Board appointments are
considered the search for candidates is conducted, and appointments are made,
on merit, against objective criteria and with due regard for the benefits of
diversity on the Board, including gender.
The Company Secretary supports the Chairman in addressing the training and
development needs of Directors.
As a small company, all members of the Board share responsibility for all
Board functions. As such the Board will from time to time engage outside
consultants to provide an independent assessment.
7. Evaluate Board performance based on clear and relevant objectives, seeking continuous improvement
The Board carries out an evaluation of its performance annually, considering
the Financial Reporting Council's Guidance on Board Effectiveness. All
Directors undergo a performance evaluation before being proposed for
re-election to ensure that their performance is and continues to be effective,
that where appropriate they maintain their independence and that they are
demonstrating continued commitment to the role.
Details of the Board performance effectiveness process will be included in the
Directors'
Remuneration Report on page 27-28.
8. Promote a corporate culture that is based on ethical values and behaviors
The Group is committed to maintaining and promoting high standards of business
integrity. Company values, which incorporate the principles of corporate
social responsibilities (CSR) and sustainability, guide the Group's
relationships with clients, employees and the communities and environment in
which we operate. The Group's approach to sustainability addresses both our
environmental and social impacts, supporting the Group's vision to remain an
employer of choice, while meeting client demands for socially responsible
partners.
Company policy strictly adheres to local laws and customs while complying with
international laws and regulations. These policies have been integral in the
way group companies have done business in the past and will continue to play a
central role in influencing the Group's practice in the future.
The ethical values of Angus Energy including environmental, social and
community and relationships, are set out on pages 11 and 12 and 32 to 36 of
the Annual Report.
9. Maintain governance structures and processes that are fit for purpose and support good decision- making by the Board
The Company has adopted a model code for directors' dealings and persons
discharging managerial responsibilities appropriate for an AIM company,
considering the requirements of the Market Abuse Regulations ("MAR"), and take
reasonable steps to ensure compliance is also applicable to the Group's
employees (AIM Rule 21 in relation to directors' dealings).
The Corporate Governance Statement details the company's governance
structures, the role and responsibilities of each director. Details and
members of the Audit Committee,
Remuneration Committee, Nomination Committee and AIM Rules compliance
committee can be found on pages 23.
10. Communicate how the company is governed and is performing by maintaining a dialogue with shareholders and other relevant stakeholders.
The Company encourages two-way communication with both its institutional and
private investors and responds quickly to all queries received. The Managing
Director talks regularly with the Group's major shareholders and ensures that
their views are communicated fully to the Board.
The Board recognises the AGM as an important opportunity to meet private
shareholders. The Directors are available to listen to the views of
shareholders informally immediately following the AGM.
To the extent that voting decisions are not in line with expectations, the
Board will engage with shareholders to understand and address any issues.
In addition to the investor relations activities carried out by the Company as
set out above, and other relevant disclosures included on this Investor
Relations section of the Company's website, reports on the activities of each
of the Committees during the year will be set out in the Annual Report on page
22-24.
The Board and its committees
At the beginning of the reporting year, the Board of the Group consisted of
three Executive Directors and two non-Executive Directors. At the date of
approval these financial statements, the Board of the Group consisted of three
Executive Directors and three non- Executive Directors.
The Board met on 12 occasions during the year to 30 Board
September 2022. The table below sets out the Board meetings held by the meetings
Company for the financial year ended 30 September 2022 and attendance of each
Director:
Executive Directors
George Lucan 12/12
Carlos Fernandes 12/12
Andrew Hollis 12/12
Non-Executive Directors
Patrick Clanwilliam 10/12
Cameron Buchanan 10/12
Paul Forrest 01/12
The Group has established an audit committee, a remuneration committee, a
nomination committee and an AIM Rules compliance committee with formally
delegated duties and responsibilities.
Audit committee
The audit committee comprised of Paul Forrest, Carlos Fernandes and Patrick
Clanwilliam, with Paul Forrest as chairman. The composition of these
committees may change over time as the composition of the Board changes.
The Audit Committee helps the Board discharge its responsibilities regarding
financial reporting, external and internal audits and controls as well as
reviewing the Group's annual and half-year financial statements, other
financial information and internal Group reporting.
The Auditor Committee Report is presented on page 25.
Remuneration committee
The remuneration committee comprised of Paul Forrest, Patrick Clanwilliam and
Krzysztof Zielicki, with Paul Forrest as chairman. The composition of these
committees may change over time as the composition of the Board changes.
The remuneration committee will determine the scale and structure of the
executive directors' and senior employees' remuneration and the terms of their
respective service or employment contracts, including share option schemes and
other bonus arrangements. The remuneration and terms and conditions of the
non-executive directors of the Group will be set by the Chairman and executive
members of the Board.
The Directors' Remuneration Report is presented on page 27 to 28.
Nomination committee
The nomination committee comprised of Patrick Clanwilliam, Andrew Hollis and
Paul Forrest with Patrick Clanwilliam as chairman. The composition of these
committees may change over time as the composition of the Board changes.
The nomination committee will determine the composition of the Board of the
Group and appointment of senior employees. It will develop succession plans as
necessary and report to the Directors.
Where new Board appointments are considered the search for candidates is
conducted, and appointments are made, on merit, against objective criteria and
with due regard for the benefits of diversity on the Board, including gender.
The Board carries out an evaluation of its performance annually, taking into
account the
Financial Reporting Council's Guidance on Board Effectiveness.
AIM Rules compliance committee
The AIM Rules compliance committee comprised of George Lucan, Carlos Fernandes
and Patrick Clanwilliam with George Lucan as chairman. The composition of
these committees may change over time as the composition of the Board changes.
The AIM Rules compliance committee will ensure that procedures, resources and
controls are in place to ensure that AIM Rules compliance by the Group is
operating effectively at all times and that the executive directors are
communicating effectively with the Group's nominated adviser regarding the
Group's ongoing compliance with the AIM Rules and in relation to all
announcements and notifications and potential transactions.
The Board will keep the Group's compliance with the new Market Abuse
Regulation (MAR) regime under review and will adopt such policies and
practices as the Board consider necessary to ensure such compliance from time
to time. This includes compliance with requirements regarding directors'
dealings.
The AIM Rules compliance committee met three times during the period under
review to discuss general compliance issues.
Other matters
The Board believes that the Group has a strong governance culture and this has
been reinforced by the adoption of the QCA Code and recognition of the key
principles of corporate governance set out in the QCA Code, which the Board
continually considers in a manner appropriate for a company of its size.
Patrick Clanwilliam
Chairman
7 March 2023
The Audit Committee helps the Board discharge its responsibilities regarding
financial reporting, external and internal audits and controls as well as
reviewing the Group's annual and half-year financial statements, other
financial information and internal Group reporting. This includes:
· considering whether the Company has followed appropriate accounting
standards and, where necessary, made appropriate estimates and judgments
taking into account the views of the external auditors;
• reviewing the clarity of disclosures in the financial statements and
considering whether the disclosures made are set properly in context;
• where the audit committee is not satisfied with any aspect of the
proposed financial reporting of the Company, reporting its view to the Board
of directors;
• reviewing material information presented with the financial
statements and corporate governance statements relating to the audit and to
risk management; and
• reviewing the adequacy and effectiveness of the Company's internal
financial controls and, unless expressly addressed by a separate board risk
committee composed of independent directors, or by the Board itself, review
the Company's internal control and risk management systems and, except where
dealt with by the Board or risk management committee, review and approve the
statements included in the annual report in relation to internal control and
the management of risk.
The Audit Committee assists by reviewing and monitoring the extent of
non-audit work undertaken by external auditors, advising on the appointment of
external auditors and reviewing the effectiveness of the Group's internal
controls and risk management systems. The ultimate responsibility for
reviewing and approving the Annual Report and financial statements and the
half-yearly reports remains with the Board.
During the year, no non-audit services were provided to the group for the year
under review. The audit committee considered the nature, scope of engagement
and remuneration paid were such that the independence and objectivity of the
auditors were not impaired. Fees paid for audit services are disclosed in Note
6.
During the financial year, the Audit Committee met twice with the auditor,
Crowe U.K. LLP, to review audit planning and findings with regard to the
Annual Report and review comments of the interim financial statements.
Significant reporting issues considered during the year included the
following:
1. Impairments of oil assets
The Committee has reviewed the carrying values of the Groups oil assets,
comprised of the oil production assets, exploration and evaluation (E&E)
assets. Based on the work performed during the audit, and through discussions
with management, the committee considers that the carrying value of E&E
assets are not impaired. The committee have considerate it prudent not to
impair the oil production assets based on the estimated oil reserves and
forecast level of future production.
2. Going concern
The Committee also considered the Going Concern basis on which the accounts
have been prepared and can refer shareholders to the Group's accounting policy
set out in Note 3.3 and Note 4 (b). The directors are satisfied that the going
concern basis is appropriate for the preparation of the financial statements.
3. Valuation of Derivative
The Committee has reviewed the carrying value of the closing derivative
liability. Based on the work performed during the audit, and through
discussions with management, the committee considers that the carrying value
of the liability is appropriate.
Paul Forrest
Chairman - Audit Committee
7 March 2023
This report sets out the remuneration policy operated by the Company in
respect of the Executive and Non-Executive Directors. The remuneration policy
is the responsibility of the remuneration committee, a sub-committee of the
Board. No Director is involved in discussions relating to their own
remuneration.
Remuneration policy
The objective of the proposed remuneration policy is to attract, retain and
motivate high calibre executives to deliver outstanding shareholder returns
and at the same time maintain an appropriate compensation balance with the
other employees of the Group.
Directors' remuneration
The normal remuneration arrangements for Executive Directors consists of base
salary, performance bonuses and other benefits as determined by the Board.
Each of the Executive Directors has a service agreement that can be terminated
at any time by either party giving to the other twenty months' written notice.
Compensation for loss of office is restricted to base salary and benefits
only.
The remuneration packages for the Executive Directors are detailed below:
• Base Salary:
Annual review of the base salaries of the Executive Directors are concluded
after taking into account the Executive Directors' role, responsibilities and
contribution to the Group performance.
• Performance Bonus:
Bonus arrangements are discretionary and are payable depending on the
performance of the Executive Directors in meeting their key performance
indicators and in the wider context with the performance of the Group.
• Benefits:
Benefits include payments for provident funds that are mandatory and statutory
pension payments as required by laws of the resident countries of the
Executive Directors, health insurance and other benefits.
• Longer term incentives:
In order to further incentivise the Directors and employees, and align their
interests with shareholders, the Company has granted share options in the
current and previous years, as set out on page 28. The share options will vest
at various future dates as described in the note 18 to the financial
statements. There are no conditions attached to vesting other than service
conditions.
Non-Executive Directors are remunerated solely in the form of Director Fees
determined by the Board and are not entitled to pensions, annual bonuses or
employee benefits.
Performance evaluation
All Directors undergo a performance evaluation before being proposed for
re-election to ensure that their performance is and continues to be effective,
that where appropriate they maintain their independence and that they are
demonstrating continued commitment to the role.
Appraisals are carried out each year with all Executive Directors. All
continuing Directors stand for re-election every 3 years. Succession planning
at the current time is limited due to the current size of the Board.
The tables below set out the respective Directors' remuneration and fees:
2022 Salary Termination Share based Total
payment payment
£'000 £'000 £'000
George Lucan 127 - - 127
Andrew Hollis 127 - - 127
Carlos Fernandes 120 - - 120
Cameron Buchanan 41 30 71
Patrick Clanwilliam 75 - 75
Paul Forrest 7 7
497 30 - 527
=========== =========== ========== =========
2021 Salary Termination Share based Total
payment payment
£'000 £'000 £'000
George Lucan 127 - 7 134
Andrew Hollis 127 - 7 134
Carlos Fernandes 120 - 7 127
Cameron Buchanan 45 - - 45
Patrick Clanwilliam 75 - - 75
494 - 21 515
=========== ========== ========== =========
The Remuneration Committee met three times during the year to review the scale
and
structure of the executive directors' and senior employees' remuneration.
Paul Forrest
Chairman - Remuneration Committee
7 March 2023
George Lucan
Chief Executive Officer
Experienced finance professional with over thirty years' behind him in debt
and equity markets. After graduating from Cambridge University, he began his
career at Dresdner Kleinwort Benson where he spent 10 years, mainly within the
Structured Finance team, and continued in alternative fund management, most
recently with Rudolf Wolff Limited. He brings, in addition, private equity
experience in the fields of energy and alternative energy.
Andrew Hollis Technical Director
Andrew has over 40 years' experience in all technical aspects of oil and gas,
exploration and production. After 25 years in petroleum and reservoir
engineering for British Gas he became an independent consultant specialising
in Russia, the FSU and Eastern Europe and also provided specialist reserves
determination skills to Gaffney Cline and Associates.
Carlos Fernandes Finance Director
Carlos has been part of the Angus team since 2013 and has seen the company's
transition from private to public. Prior to his appointment as Finance
Director, he was the Chief Financial Officer of the group. He has over 13
years commercial experience working in the Mining and Oil & Gas industry.
Patrick Clanwilliam Non-Executive Director
Paddy's previous responsibilities include the Chair of Eurasia Drilling
Company Limited (EDCL.LI) the largest drilling and work-over company in
Eurasia. He is also a former Non- Executive Director of SOMA Oil & Gas, a
private exploration play in deepwater offshore Somalia and OJSC Polyus Gold
(OPYGY) the largest Russian gold mining company by market share.
Paul Forrest
Non-Executive Director
Paul Forrest has nineteen years' experience on the natural resources sector,
including ten years in offshore oil and gas in the Philippines, and more
recently seven years UK onshore oil and gas culminating in the acquisition of
the Saltfleetby Project in 2019. He is the former Financial Controller of AIM
traded Forum Energy Plc and Celtic Resources Plc.
Krzysztof Zielicki
Non-Executive Director
Krzysztof has over four decades of experience in the oil and gas industry. He
has held senior leadership positions in several Energy Majors, including BP,
TNK/BP and Rosneft, where he was Vice President for M&A and Strategy.
Richard Herbert
Non-Executive Director
Richard is a geologist by profession, with over 42 years in the upstream oil
and gas business. His previous roles include COO Exploration at BP, Executive
Vice-President for Technology at TNK-BP in Russia, Vice-President of
Exploration for Talisman Energy in Alberta, Canada and CEO of Canadian
independent Frontera Energy Corporation, operating in Latin America. He was
formerly General Manager of the Wytch Farm oil field in Dorset and is
currently a non- executive director of Norwegian service company PGS.
Directors' Report
The Directors present their report together with the audited consolidated
financial statements of Angus Energy plc for the year ended 30 September 2022.
Results and Dividends
The Group recorded a loss after tax of £111.947m, which included a derivative
loss of
£110.309m in relation to the derivative instrument, resulting in an adjusted
loss of £1.638m (2021: loss of £2.455m). The derivative loss is based on
future production and calculated using forward gas prices as at 30 September
2022. The derivative will be realised to a profit or loss when the payments
under the derivative instruments become due. The Directors do not recommend
the payment of a dividend.
Directors
The Directors who were in office during the year and up to the date of signing
the financial statements, unless stated, were:
Executive Director
George Lucan (appointed on 29 January 2019)
Carlos Fernandes (appointed on 6 March 2019)
Andrew Hollis (appointed on 6 March 2019)
Non-Executive Director
Patrick Clanwilliam (appointed on 6 March 2019)
Cameron Buchanan (appointed on 18 October 2016, resigned 4 October 2022)
Paul Forrest (appointed 18 July 2022)
Krzysztof Zielicki (appointed 4 October 2022)
Richard Herbert (appointed 24 January 2023)
The Directors of the Company at the date of this report, and their
biographical summaries, are given on page 29.
The Directors' remuneration is detailed in the Directors' Remuneration Report
on page 28. All Directors benefit from the provision of Directors' and
Officers' indemnity insurance policies. Premiums payable to third parties were
£33,300 (2021 - £34,500).
Research and development
As disclosed in Note 11 and 12, the Group incurred expenditure in development
of oil and gas fields. An initial pilot study was commissioned by the company
to assess the use of these remaining wells with respect to a geothermal/heat
capture project. Initial findings appear positive, and the company is now
assessing a way forward on this. The company has also acquired seismic lines
and conducted a ground magnetic survey to better understand the geothermal
potential of certain sites in the UK. There is no other research and
development activity during the year under review.
Share Capital
At the date of this report ordinary shares are issued and fully paid. Detail
of movement in share capital during the year is given in note 17 to the
financial statements.
Substantial Shareholders
As of the date of this report the Group had been notified of the following
interests of 3% or more in the Group's ordinary share capital:
Percentage of
shareholding
Forum Energy Limited 15.17%
Kemexon Ltd 9.00%
Aleph Fin C 7.90%
Share options
There were no Share Options issued during the reporting period. See also note
18 for further details.
Financial Instruments
The financial risk management objectives and policies of the Group in relation
to the use of financial instruments and the exposure of the Group and its
subsidiary undertakings to its main risks, credit risk and liquidity risk, are
set out in note 26 to the financial statements.
Employees
The Group had 23 employees as at 30 September 2022 (2020: 13). Employees are
encouraged to directly participate in the business through an Enterprise
Management Incentive Scheme, which set out in note 18 to the financial
statements.
Going Concern
As disclosed in Note 3.3 to the financial statements, it refers to the
assumptions made by the Directors when concluding that it remains appropriate
to prepare the financial statements on the going concern basis.
Events after the reporting period
Events after the reporting period have been disclosed in Note 31.
Disclosure of Information to the Auditor
In the case of each person who was a Director at the time this report was
approved:
· so far as the Director was aware there was no relevant audit
information of which the Company's auditor was unaware; and
· the Director has taken all steps that he ought to have taken as a
Director to make himself aware of any relevant audit information and to
establish that the Company's auditor was aware of that information.
Auditor
A resolution to reappoint the auditor, Crowe U.K. LLP, will be proposed at the
forthcoming Annual General Meeting.
Approved by the Board of Directors and signed on behalf of the Board.
George Lucan
Managing Director
Statement of Director's Responsibilities
The Directors are responsible for preparing the Strategic Report, Directors'
Report and the
financial statements in accordance with applicable law and regulations.
Company law requires the Directors to prepare Group and Company financial
statements for each financial year. The Directors are required by the AIM
Rules of the London Stock Exchange to prepare Group financial statements in
accordance with UK adopted international accounting standards in conformity
with the requirements of the Companies Act 2006; and have elected under the
company law to prepare the Company statements in accordance with UK accounting
standards.
The financial statements are required by law and applicable accounting
standards to present fairly the financial position of the Group and the
Company and the financial performance of the Group. The Companies Act 2006
provides in relation to such financial statements that references in the
relevant part of that Act to financial statements giving a true and fair view
are references to their achieving a fair presentation.
Under company law the Directors must not approve the financial statements
unless they are satisfied that they give a true and fair view of the state of
affairs of the Group and the Company and of the profit or loss of the Group
for that period.
In preparing the Group and Company financial statements, the Directors are
required to:
· select suitable accounting policies and then apply them consistently;
· make judgements and accounting estimates that are reasonable and
prudent;
· state whether applicable accounting standards have been followed,
subject to any material departures disclosed and explained in the financial
statements;
· prepare the Strategic Report and Directors' report
which comply with the
requirements of the Companies Act 2006;
· prepare financial statements on the going concern basis unless it is
inappropriate to presume that the Group and the Company will continue in
business.
The Directors are responsible for keeping adequate accounting records that are
sufficient to show and explain the Group's and the Company's transactions and
disclose with reasonable accuracy at any time the financial position of the
Group and the Company and enable them to ensure that the financial statements
comply with the Companies Act 2006. They are also responsible for safeguarding
the assets of the Group and the Company and hence for taking reasonable steps
for the prevention and detection of fraud and other irregularities.
The Directors are responsible for the maintenance and integrity of the
corporate and financial information included on the Angus Energy PLC website
www.angusenergy.co.uk (http://www.angusenergy.co.uk/) .
Legislation in the United Kingdom governing the preparation and dissemination
of financial statement may differ from legislation in other jurisdictions.
Stakeholder Engagement
As a public company operating in one of the most regulated industries Angus
Energy recognise that stakeholder engagement is a key foundation for the
long-term success of the Group. Stakeholders include not only our
shareholders, lenders, and our partners, but also our suppliers &
customers, our workforce, governments & regulators, and the communities in
which we operate. The Company seeks out appropriate platforms to communicate
to a broad audience its current activities, strategic goals and broad view of
the sector and other related issues.
The section below, describes how the directors of the Company have regard for
the matters set out in Section 172(1) of the Companies Act 2006, these are:
· the likely consequences of any decision in the long term
· the interests of the company's employees,
· the need to foster the company's business relationships with
suppliers, customers
and others,
· the impact of the company's operations on the community and the
environment,
· the desirability of the company maintaining a reputation for high
standards of business conduct, and
· the need to act fairly as between members of the company.
The section below forms the Board's statement on such matters as required by
the Act. Further information regarding Angus's assessment of environmental and
community issues associated with our operations, can be found in the
Sustainability Review on pages 10 and 11 and pages 35 to 36. Review of the key
decisions and issues discussed in Board meetings and by various committees in
2022 is contained in the Corporate Governance Statement from pages 18 to 24.
Shareholders and Lenders
Angus seeks to develop an investor base of long-term holders that are aligned
with our strategy. By clearly communicating our strategy and objectives, we
maintain continued support for what we do.
Important issues include:
· Sustainable financial and operational performance
· Continued revue of new opportunities which can leverage our cost
discipline and technical skills base
· Sustainable financial and operational performance
· Capital allocation
There is regular dialogue between both institutional and retail investors and
lenders through meetings, calls, conferences, presentations and through our
Investor Questions on our website.
Highlights include:
· Investor conference calls
· Online interviews
· Investor questions regularly answered on the company's website
· Negotiating an extension of the £1,400,000 Convertible Loan Note
issued on 20 April 2020.
Partners
Sharing of risk is a fundamental component of our industry and by maintaining
aligned and collaborative relationships with our joint venture partners, we
can ensure that maximum value can be extracted from our operations in a safe
and sustainable manner.
Important issues include:
· Operational performance & HSE
· Budget setting and work programs
Angus ensures that we maintain an open dialogue with all our partners in the
Saltfleetby, Balcombe, Lidsey and Brockham licence. We seek to ensure that all
partners are aligned around common objectives for the asset and maintain safe
and efficient operations.
Highlights include:
· Acquisition of Saltfleetby Energy Limited with consideration paid in
shares and deferred consideration from gas sales (see note 30)
Customers & suppliers
Angus has through the year's development good customer base. The supply chain
is managed by Angus on behalf of its partners. We have further developed
strong relationships with key corporate suppliers.
Important issues include:
· Contract management strategy
· Uninterrupted service for customers
· Enhance value
Engagement with suppliers usually takes place with the operator and we are
closely involved and help shape the strategy and timing.
Highlights include:
· Procurement of equipment for the Saltfleetby development
· Signing offtake agreement for the sale of condensate from Saltfleetby
Workforce
Our current and future success is underpinned by our ability to engage,
motivate and adapt our workforce. Creating the right environment for employees
where their various strengths are recognised and their contributions are
valued, helps to ensure that we can deliver our shared objectives.
Important issues include:
· Group strategy
· Diversity of thinking
· Corporate culture
During 2022, internal communications were upscaled, so employees were kept
informed of all the workstreams across the Company and helped to raise key
issues with directors and executives.
Highlights include:
· Production & strategy updates
· Twice daily conference calls
· All staff involvement in CSR initiatives
Government & Regulators
Maintaining respectful and collaborative relationships with our regulatory
authorities is vital to our 'licence to operate'. We believe that the strength
of these relationships will allow us to make a sustainable and beneficial
contribution to the regions in which we operate.
Important issues include:
· Renewal of Licences
· Identifying and securing new opportunities
· Providing views on upcoming legislation and factors that are
important to the industry
· CSR commitments
Angus maintains an open dialogue with the NSTA, EA, HSE and local authorities
in the areas it operates. Angus is also a member of UKOOG, OGUK and IGEM.
Highlights include:
· Approval of the acquisition of Saltfleetby Energy Limited by the NSTA
· Successful EA permit received for the restart of production at
Saltfleetby
· Approval of the company's HSE safety case to export gas to the
National Grid
Communities & Environment
As a responsible NTSA approved and EA permitted UK operator, Angus Energy is
committed to utilising industry best practices and achieving the highest
standards of environmental management and safety. Angus Energy also seeks and
maintains positive relationships with its local communities.
Important issues include:
· Continuously assess and monitor environmental impact
· Promote internally and across our industry best practices for
environmental management and safety
Constant attention to maintaining our exemplary track record of safe oil and
gas production
· Open and honest dialogue
· Engagement with stakeholders at all stages of development
· Proactively address local concerns
· Actively minimise impact on our neighbours
Regular engagement with HSE and EA officers occurs through operational
committee meetings maintaining positive focus on health, safety and the
environment.
Highlights include:
· Zero environmental or HSE incidents during operations in 2022
· Continued community engagement
· Continued awards through the company's local scholarship program
Opinion
We have audited the financial statements of Angus Energy plc (the "Parent
Company") and its subsidiaries (the "Group") for the year ended 30 September
2022, which comprise:
· the Group statement of comprehensive income for the year ended 30
September 2022;
· the Group and parent company statements of financial position as at
30 September 2022;
· the Group statement of cash flows for the year then ended;
· the Group and parent company statements of changes in equity for
the year then ended; and
· the notes to the financial statements, including a summary of
significant accounting policies.
The financial reporting framework that has been applied in the preparation of
the Group financial statements is in accordance with UK adopted international
accounting standards in conformity with the requirements of the Companies Act
2006. The financial reporting framework that has been applied in the
preparation of the Parent Company financial statements is applicable law and
United Kingdom Accounting Standards, including Financial Reporting Standard
102 'The Financial Reporting Standard applicable in the UK andRepublic of
Ireland' (United Kingdom Generally Accepted Accounting Practice).
In our opinion:
· the financial statements give a true and fair view of the state of
the Group's and of the Parent Company's affairs as at 30 September 2022 and of
the Group's loss for the year then ended;
· the Group financial statements have been properly prepared in
accordance with UK
adopted international accounting standards in conformity with the requirements
of the Companies Act 2006;
· the Parent Company financial statements have been properly prepared
in accordance with United Kingdom Generally Accepted Accounting Practice; and
· the financial statements have been prepared in accordance with the
requirements of the Companies Act 2006.
Basis for opinion
We conducted our audit in accordance with International Standards on Auditing
(UK) (ISAs (UK)) and applicable law. Our responsibilities under those
standards are further described in the Auditor's responsibilities for the
audit of the financial statements section of our report. We are independent of
the Group and Parent Company in accordance with the ethical requirements that
are relevant to our audit of the financial statements in the UK, including the
FRC's Ethical Standard as applied to listed entities, and we have fulfilled
our other ethical responsibilities in accordance with these requirements. We
believe that the audit evidence we have obtained is sufficient and appropriate
to provide a basis for our opinion.
Material uncertainty related to going concern
On forming our opinion on the financial statements, which is not modified, we
have considered the adequacy of the disclosure made in note 3.3 to the
financial statements concerning the group and company's ability to continue as
a going concern. The financial statements have been prepared on the going
concern basis, which depends on the group and company's ability to raise
further financing to cover its ongoing working capital requirements. These
conditions, along with other matters explained in note 3.3 to the financial
statements, indicate the existence of a material uncertainty which may cast a
significant doubt about the group and company's ability to continue as a going
concern. The financial statements do not include adjustments that would result
if the group and company were unable to continue as a going concern.
In auditing the financial statements, we have concluded that the director's
use of the going concern basis of accounting in the preparation of the
financial statements is appropriate. Our evaluation of the directors'
assessment of the entity's ability to continue to adopt the going concern
basis of accounting included Reviewing management's financial projections for
the Group and parent company for a period of more than 12 months from the date
of approval of the financial statements.
• Reviewing management's financial projections for the Group and
parent company for a period of
more than 12 months from the date of approval of the financial statements.
• Checking the numerical accuracy of management's financial
projections
• Challenging management on the assumptions underlying those
projections and sensitised them to reduce anticipated net cash inflows from
future trading activities.
• Obtained the latest management results post year end 30
September 2022 to review how the Group and parent company are trending toward
achieving the forecast.
• Performed sensitivity analysis on key inputs of the forecast
by calculating the impact of various scenarios and considering the impact on
the group and parent Company's ability to continue as a going concern in the
event that a downward scenario occurs.
• Assessing the completeness and accuracy of the matters described
in the going concern disclosure within the significant accounting policies as
set out in Note 3.3.
Our responsibilities and the responsibilities of the directors with respect to
going concern are described in the relevant sections of this report.
Overview of our audit approach
Materiality
In planning and performing our audit we applied the concept of materiality. An
item is considered material if it could reasonably be expected to change the
economic decisions of a user of the financial statements. We used the concept
of materiality to both focus our testing and to evaluate the impact of
misstatements identified.
Based on our professional judgement, we determined overall materiality is
£2,200,000 (2021:
£420,000) which is based on 2% of the derivative's fair value movement of
£110.309m. A Specific materiality for the Group financial statements other
than the derivative was determined to be £450,000 based on 3% of Group net
assets. The parent company overall materiality is set at £100,000 (2021:
£75,000) based on a percentage of loss before tax.
We use a different level of materiality ('performance materiality') to
determine the extent of our testing for the audit of the financial statements.
Performance materiality is set based on the audit materiality as adjusted for
the judgements made as to the entity risk and our evaluation of the specific
risk of each audit area having regard to the internal control environment.
This is set at £315,000 (2021: £225,000) for the group and £71,429 (2021:
£56,260) for the parent company.
Where considered appropriate performance materiality may be reduced to a lower
level, such as, for related party transactions and directors' remuneration.
We agreed with the Audit Committee to report to it all identified errors in
excess of £23,000 (2021:
£15,000). Errors below that threshold would also be reported to it if, in our
opinion as auditor, disclosure was required on qualitative grounds.
Overview of the scope of our audit
Our Group audit scope included a full audit of all three reporting entities
which account for 100% of
the Group's net assets and loss before tax.
Key Audit Matters
Key audit matters are those matters that, in our professional judgement, were
of most significance in our audit of the financial statements of the current
period and include the most significant assessed risks of material
misstatement (whether or not due to fraud) that we identified. These matters
included those which had the greatest effect on: the overall audit strategy,
the allocation of resources in the audit; and directing the efforts of the
engagement team. These matters were addressed in the context of our audit of
the financial statements as a whole, and in forming our opinion thereon, and
we do not provide a separate opinion on these matters. We set out below,
together with the material uncertainty related to going concern above, those
matters we are identified as key audit matters.
This is not a complete list of all risks identified by our audit.
Key audit matter How the scope of our audit addressed the key audit matter
Carrying value of oil & gas production assets and recovery of Investment We focused on this area due to the significance of the carrying value of the
in subsidiaries. assets. The risk of impairment was considered likely to be highly sensitive to
assumptions and estimates about future oil and gas prices and discount rate.
Other assumption include exchange rates, future production levels, reserves
and operating costs.
At 30 September 2022, the carrying value of oil & gas production assets
was £80.792 million.
We evaluated management's assessment of indicators of impairment and
recoverability assessment for the Group's oil & gas production assets. We
The recoverable value of the Saltfleetby, Brockham and Lidsey production have:
assets are based on the net present value of estimated future net cash flow
after the application of an appropriate discount rate. If the production rate · tested price and discount rate assumptions by comparing forecast oil
or reserve quantity are less than anticipated, appropriate adjustments would price assumptions to the latest market evidence available and reviewed the
be necessary to further impair the carrying value of these assets. reasonableness of the discount rate applied;
· tested the accuracy of the forecast cash flows and the assumptions
used within the cash flow projection model.
· We assessed the quality of management's previous budgets and
forecasts by comparing them to actual performance.
· We assessed the timing of when Saltfleetby was reclassified from
E&E asset to Production asset as a result of entering gas production
during the financial year.
· Considered the future recoverability of the Saltfleetby production
asset in respect of recoverability of the parent company's investment in
subsidiary.
We have considered the adequacy of the disclosure to the financial statements
and the work performed by management including the key judgement and
sensitivity analysis presented in note 4, note 11, and note 5 the Parent
Company's Investment in subsidiary (pg 82) respectively.
Carrying value of exploration and evaluation (E&E) assets
We reviewed management's assessment of indicators of impairment for the
ongoing exploration assets under IFRS 6 including the review of the validity
At 30 September 2022, the carrying value of exploration and evaluation assets of the licence and the progress of the technical work to date. In
was £5.572 million.
addition, we evaluated management's Net Present Value (NPV) models for the
Balcombe assets. We challenged the key estimates and assumptions used by
management.
The Balcombe site is still in the exploration and evaluation phase as
technical and economic feasibility have yet to be established.
We also reviewed management's assessment of the future decommissioning costs
and assessed the appropriateness of the assumptions concerning the timing and
The recoverable value of these assets are based on the net present value of discounting of the estimated cost of decommissioning.
estimated future net cash flow after the application of an appropriate
discount rate. If the production rate or reserve quantity are less than
anticipated, appropriate adjustments would be necessary to impair the carrying
value of these assets. We reviewed the disclosure made concerning thismatter to ensure that it is
consistent with our understanding.
Carrying value of derivative financial instrument We obtained copies of the contracts between the Group and the provider of the
Gas Swap arrangements.
At 30 September 2022, the carrying value of the gas swap derivative financial
instrument was £158.680 million, recorded in liabilities. We obtained the Independent pricing curve data (I.C.I.S Heren) as at 30
September 2022.
We recalculated management's assessment of the valuation of the derivative as
The valuation of this instrument is subjective and variations in this value at 30 September 2022 benchmarked to the I.C.I.S Heren curve.
would have a material impact on the income statement
and the statement of financial position.
We discussed the process of valuation with management and the provider of the
gas swap arrangements.
Our audit procedures in relation to these matters were designed in the context
of our audit opinion as a whole. They were not designed to enable us to
express an opinion on these matters individually andwe express no such
opinion.
Other information
The directors are responsible for the other information contained within the
annual report. The other information comprises the information included in the
annual report, other than the financial statements and our auditor's report
thereon. Our opinion on the financial statements does not cover the other
information and, except to the extent otherwise explicitly stated in our
report, we do not express any form of assurance conclusion thereon.
Our responsibility is to read the other information and, in doing so, consider
whether the other information is materially inconsistent with the financial
statements or our knowledge obtained in the audit or otherwise appears to be
materially misstated. If we identify such material inconsistencies or apparent
material misstatements, we are required to determine whether this gives rise
to a material misstatement in the financial statements themselves. If, based
on the work we have performed, we conclude that there is a material
misstatement of this other information, we are required to report that fact.
We have nothing to report in this regard.
Opinion on other matter prescribed by the Companies Act 2006
In our opinion based on the work undertaken in the course of our audit
· the information given in the strategic report and the directors'
report for the financial year forwhich the financial statements are prepared
is consistent with the financial statements; and
· the strategic report and directors' report have been prepared in
accordance with applicable legal requirements.
Matters on which we are required to report by exception
In light of the knowledge and understanding of the Group and the Parent
Company and their environment obtained in the course of the audit, we have not
identified material misstatements in the strategic report or the directors'
report.
We have nothing to report in respect of the following matters where the
Companies Act 2006 requiresus to report to you if, in our opinion:
· adequate accounting records have not been kept by the Parent Company,
or returns adequatefor our audit have not been received from branches not
visited by us; or
· the parent company financial statements are not in agreement with the
accounting recordsand returns; or
· certain disclosures of directors' remuneration specified by law are
not made; or
· we have not received all the information and explanations we
require for our audit.
Responsibilities of the directors for the financial statements
As explained more fully in the directors' responsibilities statement set out
on page 32, the directors areresponsible for the preparation of the financial
statements and for being satisfied that they give a trueand fair view, and for
such internal control as the directors determine is necessary to enable the
preparation of financial statements that are free from material misstatement,
whether due to fraud orerror.
In preparing the financial statements, the directors are responsible for
assessing the group's and parentcompany's ability to continue as a going
concern, disclosing, as applicable, matters related to going concern and using
the going concern basis of accounting unless the directors either intend to
liquidatethe group or the parent company or to cease operations, or have no
realistic alternative but to do so.
Auditor's responsibilities for the audit of the financial statements
Our objectives are to obtain reasonable assurance about whether the financial
statements as a whole are free from material misstatement, whether due to
fraud or error, and to issue an auditor's report that includes our opinion.
Reasonable assurance is a high level of assurance, but is not a guarantee
thatan audit conducted in accordance with ISAs (UK) will always detect a
material misstatement when it exists. Misstatements can arise from fraud or
error and are considered material if, individually or in theaggregate, they
could reasonably be expected to influence the economic decisions of users
taken on the basis of these financial statements.
Irregularities, including fraud, are instances of non-compliance with laws and
regulations. We design procedures in line with our responsibilities, outlined
above, to detect material misstatements in respect of irregularities,
including fraud. The extent to which our procedures are capable of detecting
irregularities, including fraud, is detailed below however the primary
responsibility for the prevention and detection of fraud lies with management
and those charged with governance of the Company.
• We obtained an understanding of the legal and regulatory
frameworks that are applicable to the Group and the procedures in place for
ensuring compliance. The most significant identified were the Companies Act
2006 and the QCA Corporate Governance Code. Our work included direct enquiry
of the Company Secretary who oversees all legal proceedings, reviewing Board
and relevant committee minutes and inspection of correspondence.
• As part of our audit planning process we assessed the
different areas of the financial statements, including disclosures, for the
risk of material misstatement. This included considering the risk of fraud
where direct enquiries were made of management and those charged with
governance concerning both whether they had any knowledge of actual or
suspected fraud and their assessment of the susceptibility of fraud. We
considered the risk was greater in areas that involve significant management
estimate or judgement. Based on this assessment we designed audit procedures
to focus on the key areas of estimate or judgement, this included specific
testing of journal transactions, both at the year end and throughout the year.
• We used data analytic techniques to identify any unusual
transactions or unexpected relationships, including considering the risk of
undisclosed related party transactions.
Owing to the inherent limitations of an audit, there is an unavoidable risk
that some material misstatements of the financial statements may not be
detected, even though the audit is properly planned and performed in
accordance with the ISAs (UK).
The potential effects of inherent limitations are particularly significant in
the case of misstatement resulting from fraud because fraud may involve
sophisticated and carefully organised schemes designed to conceal it,
including deliberate failure to record transactions, collusion or intentional
misrepresentations being made to us.
A further description of our responsibilities for the audit of the financial
statements is
located on the Financial Reporting Council's website at:
www.frc.org.uk/auditorsresponsibilities
(http://www.frc.org.uk/auditorsresponsibilities) . This description forms part
of our auditor's report.
Use of our report
This report is made solely to the company's members, as a body, in accordance
with Chapter 3 of Part16 of the Companies Act 2006. Our audit work has been
undertaken so that we might state to the company's members those matters we
are required to state to them in an auditor's report and for no other purpose.
To the fullest extent permitted by law, we do not accept or assume
responsibility to anyone other than the company and the company's members as a
body, for our audit work, for this report, or for the opinions we have formed.
John Glasby
Senior Statutory Auditor
For and on behalf of Crowe U.K. LLP Statutory Auditor 55 Ludgate Hill London
EC4M 7JW
Date: 7 March 2023
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME YEAR ENDED 30 SEPTEMBER 2022
2022 2021
Note £'000 £'000
Revenue 5 3,142 -
Cost of sales (581) (294)
Depletion cost (529) -
Gross profit / (loss) 2,032 (294)
Administrative expenses (2,619) (1,918)
Share option charge 18 (811) (182)
Operating loss 6 (1,398) (2,394)
Derivative financial instrument loss 25 (110,309) (13,143)
Finance cost 7 (240) (61)
Loss before taxation (111,947) (15,598)
Taxation 9 - -
Loss for the year 6 (111,947) (15,598)
Total comprehensive loss for the year 6 (111,947) (15,598)
Loss for the year attributable to:
Owners of the parent company (111,947) (15,598)
Total comprehensive loss attributable to:
Owners of the parent company (111,947) (15,598)
(111,947) (15,598)
Earnings per share (EPS) attributable to owners of the parent: 20
Basic and diluted EPS (in pence) (6.79) (1.78)
The notes on page 49 to 78 form part of these of financial statements All
amounts are derived from continuing operations.
2022 2021
Note £'000 £'000
ASSETS
Non-current assets
Property, plant and equipment 10 27 8
Exploration and evaluation assets 12 5,572 13,073
Oil & gas production assets 11 80,792 6,534
Lease assets 28 48 11
Trade and other receivables 15 - 11,117
Total non-current assets 86,439 30,743
Current assets
Trade and other receivables 15 4,107 5,132
AFS financial investments 14 20 28
Lease assets 28 33 -
Inventory 16 3 -
Cash and cash equivalents 747 6,160
Total current assets 4,910 11,320
TOTAL ASSETS 91,349 42,063
EQUITY
Equity attributable to owners of the parent:
Share capital 17 5,529 1,933
Share premium 17 38,708 23,605
Merger reserve 19 (200) (200)
Loan note reserve 23 106 106
Accumulated loss (138,599) (27,463)
TOTAL EQUITY (94,456) (2,019)
Current liabilities
Trade and other payables 21 11,154 1,974
Loan payable - current 24 5,250 1,500
Derivatives liability 25 86,583 3,083
Total current liabilities 102,987 6,557
Non-current Liabilities
Provisions 22 4,369 3,007
Trade and other payables 21 52 1,331
Loan payable - non current 24 6,300 10,500
Derivatives liability 25 72,097 22,687
Total non-current liabilities 82,818 37,525
TOTAL LIABILITIES 185,805 44,082
TOTAL EQUITY AND LIABILITIES 91,349 42,063
The notes on page 49 to 78 form part of these of financial statements
The financial statements were approved by the Board of Directors and
authorized for issue on 7 March 2023 and were signed on its behalf by:
George Lucan - Director Company number: 09616076
Share Merger Loan Note Accumulated Total
Share capital premium reserve reserves loss equity
£'000 £'000 £'000 £'000 £'000 £'000
Balance at 30 September 2020 1,430 21,982 (200) 106 (12,047) 11,271
Loss for the year ‐ ‐ - - (15,598) (15,598)
Total comprehensive income for the year
- - - - (15,598) (15,598)
Transaction with owners
Issue of shares 503 1,770 ‐ - - 2,273
Less: issuance costs ‐ (147) ‐ - - (147)
Grant of share options ‐ - ‐ - 182 182
Balance at 30 September 2021 1,933 23,605 (200) 106 (27,463) (2,019)
Loss for the year ‐ ‐ - - (111,947) (111,947)
Total comprehensive loss for the year
- - - - (111,947) (111,947)
Transaction with owners
Issue of shares 3,596 15,615 ‐ - - 19,211
Less: issuance costs ‐ (512) ‐ - - (512)
Grant of share options ‐ - ‐ - 811 811
Balance at 30 September 2022 5,529 38,708 (200) 106 (138,599) (94,456)
The notes on page 49 to 78 form part of these of financial statements
Year ended 30 September Year ended 30 September
2022 2021
£'000 £'000
Cash flow from operating activities
Loss for the year before taxation (111,947) (15,598)
Adjustment for:
Derivative financial instrument loss 110,309 13,143
Share option charge 811 182
Equity settled in lieu professional fees 683 -
Interest payable 234 61
Depletion charge 529 -
Lease amortization charges 35 -
Depreciation of owned assets 11 7
Cash generated/(used) in operating activities before changes in working
capital
665 (2,205)
Change in trade and other receivables 1,860 (3,013)
Change in other payables and accruals (5,043) 433
Cash used in operating activities before tax (2,518) (4,785)
Income tax paid - -
Net cash flow used in operations (2,518) (4,785)
Cash flow from investing activities
Acquisition cost of Saltfleetby Energy Limited (250)
Acquisition of property, plant and equipment 10 (15) -
Acquisition of exploration and evaluation assets 12 (12,338) (4,890)
Acquisition of oil and gas production assets 11 (276) (131)
Net cash flow from investing activities (12,879) (5,021)
Cash flow from financing activities
(Repayment)/drawdown of debt facility (450) 12,000
Lease principal repayment (30) (12)
Proceeds from issuance of shares 10,464 2,126
Net cash flow from financing activities 9,984 14,114
Net (decrease)/increase in cash & cash equivalents (5,413) 4,308
Cash and cash equivalent at beginning of year 6,160 1,852
Cash and cash equivalent at end of year 747 6,160
The notes on page 49 to 78 form part of these of financial statements
1. General information
Angus Energy Plc (the "Company") is incorporated and domiciled in the United
Kingdom. The address of the
registered office is Building 3 Chiswick Park, 566 Chiswick High Road, London,
W4 5YA.
The principal activity of the Company is that of investment holding. The
principal activity of the Group is that of oil and gas extraction for
distribution to third parties. The principal activities of the various
operating subsidiaries are disclosed in note 13.
2. Presentation of financial statements
The financial statements have been presented in Pounds Sterling (£) as this
is the currency of the primary economic environment that the group operates
in. The amount is rounded to the nearest thousand (£'000), unless otherwise
stated.
3. Accounting policies
The principal accounting policies applied in the preparation of these
financial statements are set out below.
3.1 Basis of preparation
These financial statements have been prepared in accordance with UK adopted
international accounting standards in conformity with the requirements of the
Companies Act 2006. The financial statements have been prepared on the
historical cost basis except for certain assets and liabilities which are
stated at their fair value.
3.2 New standards, amendments to and interpretations to published standards not yet effect
The Directors have considered those standards and interpretations, which have
not been applied in the financial statements but are relevant to the Group's
operations, that are in issue but not yet effective and do not consider that
they will have a material impact on the future results of the Group.
3.3 Going concern
The consolidated financial statements have been prepared on a going concern
basis. The Group made a loss for the year of £111.947 million which included
a derivative loss of £110.309 million for the derivative instrument resulting
in an adjusted loss of £1.638 million (2021: loss of £2.455 million) and
recorded net cash outflow used from operating activities of £1.118 million
(2021: £4.785 million ). The derivative loss is based on future production
and calculated using forward gas prices as at 30 September 2022. The
derivative will be realised to a profit or loss when the payments under the
derivative instruments become due.
The Group meets its day to day working capital requirements through existing
cash reserves. At 30 September 2022, the Group had £0.747 million of
available cash. During the year, the Group raised gross proceeds of
£8,825 million as a result of placing of new ordinary shares and converting
warrants to ordinary shares.
The war in Ukraine and the level of inflation in the UK has not had a
significant immediate impact on the company's operations. The Directors are
aware that if the current situation becomes further prolonged then this may
change. The consolidated financial statements have been prepared on a going
concern basis.
In response to this extraordinary period, the Directors have taken the prudent
decision to introduce cost saving measures where possible to preserve working
capital. The Directors have assessed the Group's working capital forecasts for
a minimum of 12 months from the date of the approval of these financial
statements. In undertaking this assessment, the Directors have reviewed the
underlying business risks, and the potential implications these risks would
have on the Group's liquidity and its business model over the assessment
period. This assessment included a detailed cash flow analysis prepared by the
management, and they also considered several reasonably plausible downside
scenarios. The scenarios included potential delays to expected future
revenues. In making their overall assessment, the Directors took into account
the
advanced stage of the development of the Saltfleetby gas field and the impact
of the derivative instrument if there were delays in gas production. As
outlined in note 25 the Group has committed to future cash flows as a result
of the derivatives in place which are due even if gas is delayed.
Forecast cashflows place reliance on there not being a suspension of gas
production for an unforeseen significant period. Current production levels are
in excess of derivative requirements.There are no present operational concerns
and whilst there are mitigating steps that could be taken, the contracted
derivative will need to be settled at a fixed point in time. In the event of
any significant delay this would be subject to further negotiation with the
derivative holder or further funding may be required. It is also noted there
is a catch-up derivative payment of £4,175k due in June 2023 which the group
is forecast to meet however should there be a timing difference between cash
inflows and outflows then Further funding may be required. The Directors have
therefore identified a material uncertainty which may cast doubt over the
Group's ability to continue as a going concern.
Based on the current management's plan, management considered that the working
capital from the expected revenue generation are sufficient for the
expenditure to date as well as the planned forecast expenditure for the
forthcoming twelve months from the date of the approval of this financial
statement. As a result of that review the Directors consider that it is
appropriate to adopt the going concern basis preparation, notwithstanding the
material uncertainty as outlined above. The Director has assessed the
company's ability to continue as a going concern and have reasonable
expectation that the company has adequate resources to continue operations for
a period of at least 12 months from the date of approval of these financial
statements.
These financial statements do not include any adjustment that may result from
any significant changes in the assumption used.
3.4 Basis of consolidation
The consolidated financial statements comprise the financial information of
the Company and its subsidiaries (the "Group") made up to the end of the
reporting period. Control is achieved when the Group is exposed, or has
rights, to variable returns from its involvement with the investee and has the
ability to affect those returns through its power over the investee.
The consolidated financial statements present the results of the Company and
its subsidiaries and joint arrangements as if they formed a single entity.
Inter-company transactions and balances between group companies are therefore
eliminated in full. The financial information of subsidiaries is included in
the Group's financial statements from the date that control commences until
the date that control ceases.
Profit or loss and each component of other comprehensive income (OCI) are
attributed to the equity holders of the parent of the Group. When necessary,
adjustments are made to the financial information of subsidiaries to bring
their accounting policies into line with the Group's accounting policies. All
intragroup assets and liabilities, equity, income, expenses and cash flows
relating to transactions between members of the Group are eliminated in full
on consolidation.
The acquisition of Angus Energy Holding Limited by the Company, by way of
share exchange, for the year ended 30 September 2016 was that of a
re-organisation of entities which were under common control. As such, that
combination also falls outside the scope of IFRS 3 'Business Combinations'
(Revised 2008). The Directors have, therefore, decided that it is appropriate
to reflect the combination using the merger basis of accounting in order to
give a true and fair view. No fair value adjustments were made as a result of
that combination.
3.5 Property, plant and equipment
All fixed assets are initially recorded at cost. Depreciation is calculated so
as to write off the cost of an asset, less its estimated residual value, over
the useful economic life of that asset as follows:
Fixtures and fittings - 25% straight line Plant and
machinery - 20%
straight line Motor
vehicles -
20% straight line
3.6 Oil and natural gas exploration and evaluation (E&E) expenditure
Oil and natural gas exploration and evaluation expenditure is accounted for
using the successful efforts method of accounting.
(a) Licence and property acquisition costs
Licence and property leasehold acquisition costs are capitalised within
intangible fixed assets and amortised on a straight-line basis over the
estimated period of exploration. Upon determination of economically
recoverable reserves amortisation ceases and the remaining costs are
aggregated with exploration expenditure and held on a field-by-field basis as
proved properties awaiting determination within intangible fixed assets. When
development is sanctioned, the relevant expenditure is transferred to tangible
production assets.
(b) Exploration expenditure
Geological and geophysical exploration costs are charged against income as
incurred. Costs directly associated with an exploration well are capitalised
as an intangible asset until drilling of the well is complete and the results
have been evaluated. If hydrocarbons are not found, the exploration
expenditure is written off as a dry hole. If hydrocarbons are found, and,
subject to further appraisal activity, are likely to be capable of commercial
development, the costs continue to be carried as an asset. All such carried
costs are subject to regular technical, commercial management review to
confirm the continued intent to develop or otherwise extract value from the
discovery. When this is no longer the case, the costs are written off. When
proven and probable reserves of oil and gas are determined and development is
sanctioned, the relevant expenditure is transferred to tangible production
assets.
(c) Development expenditure
Expenditure on the construction, installation and completion of infrastructure
facilities such as platforms, pipelines and the drilling of development wells,
including unsuccessful development or delineation wells, is capitalised within
tangible production assets.
(d) Maintenance expenditure
Expenditure on major maintenance, refits or repairs is capitalised where it
enhances the performance of an asset above its originally assessed standard of
performance; replaces an asset or part of an asset which was separately
depreciated and which is then written off; or restores the economic benefits
of an asset which has been fully depreciated. All other maintenance
expenditure is charged to income as incurred.
Treatment of E&E assets at conclusion of appraisal activities
Intangible E&E assets related to each exploration licence/prospect are
carried forward, until the existence (or otherwise) of commercial reserves has
been determined. If commercial reserves have been discovered, the related
E&E assets are assessed for impairment on a cost pool basis as set out
below, and any impairment loss of the relevant E&E assets is then
reclassified as development and production assets.
(e) Financial instruments
Financial assets and financial liabilities are recognised in the Group's
statement of financial position when the Group becomes a party to the
contractual provisions of the instrument.
Loan and receivables
Loans and receivables are recognised initially at fair value plus any directly
attributable transaction costs. Subsequent to initial recognition, loans and
receivables are measured at amortised cost using the effective interest
method, less any impairment losses.
Trade receivables are recognised initially at the transaction price and
subsequently measured at amortised cost, less any impairment losses.
Trade and other payables
Trade and other payables are initially measured at fair value, net of
transaction costs, and are subsequently measured at amortised cost, where
applicable, using the effective interest method, with interest expense
recognised on an effective yield basis.
Contract Debtor
Pre-acquisition of Saltfleetby Energy Limited, gains and losses due by
Saltfleetby Energy Limited in relation to their 49% share of the Derivative
Instrument was recorded in Trade & Receivables as a contract debtor with
the debt repayable from gas sales as per the terms in the Joint Venture
Agreement. Post-acquisition of Saltfleetby Energy Limited, these are removed
on Group consolidation.
Borrowing cost
Borrowing cost that are directly attributable to the acquisition, development,
or production of a qualifying asset, that necessarily takes substantial time
to prepare, are capitalized as part of the cost the respective asset. It
consists of interest and other cost in connection with the borrowing of the
funds. Capitalization commences when activities to prepare the asset are in
progress or in future re-development activities and ceases when all activities
necessary to prepare the asset are completed. Other borrowing costs are
recognized in the statement of profit and loss and other comprehensive income
in the period in which they are incurred.
Derivative financial instrument
The group uses derivative financial instrument, to hedge its commodity price
risk, such as commodity swap contracts. The Group has elected not to apply the
hedge accounting on this derivative. Derivative financial instruments are
recognized at fair value on the date on which the contract is entered into and
subsequently measured at fair value. Derivatives are carried as financial
asset when the fair value is greater than its initial measurement and
financial liabilities when fair value is negative. Any gains or losses arising
from the changes in fair value of the derivatives are recognise in the
statement of profit and loss and other comprehensive income.
As at 30 September 2022, the Group's derivative liabilities amounted to
£158.680 million as a result of the hedging agreement entered into with
Mercuria Energy Trading SA under a Swap Contract (see Note 25)
In the determining the fair values of the financial asset and liabilities,
instruments are analysed into Level 1 to 3 as follows:
Level 1: Fair value measurements derive from quoted prices
(unadjusted) in active market for identical asset or liabilities.
Level 2: Fair value measurement derive from inputs other than quoted
prices included within level 1 that are observable for the asset or liability,
either directly or indirectly.
Level 3: Fair value measurements derive from valuation technique that
include inputs for the asset or liability that are not based on observable
market data.
3.8 Impairment of assets
(a) Financial assets
Impairment provisions for current and non-current trade receivables are
recognised based on the simplified approach within IFRS 9. During this process
the probability of the non-payment of the trade receivables is assessed. This
probability is then multiplied by the amount of the expected loss arising from
default to determine the lifetime expected credit loss for the trade
receivables. For trade receivables, which are reported net, such provisions
are recorded in a separate provision account with the loss being recognised
within administration costs in the consolidated statement of comprehensive
income. On confirmation that the trade receivable will not be collectable, the
gross carrying value of the asset is written off against the associated
provision.
Impairment provisions for receivables from related parties and loans to
related parties are recognised based on a forward looking expected credit loss
model. The methodology used to determine the amount of the provision is based
on whether there has been a significant increase in credit risk since initial
recognition of the financial asset. For those for which credit risk has
increased significantly, lifetime expected credit losses are recognised,
unless further information becomes available contrary to the increased credit
risk. For those that are determined to be permanently credit impaired,
lifetime expected credit losses are recognised.
(b) Non-financial assets
The carrying amounts of the Group's non-financial assets, other than deferred
tax assets, are reviewed at each reporting date to determine whether there is
any indication of impairment. If any such indication exists, then the asset's
recoverable amount is estimated. For assets that have indefinite lives, the
recoverable amount is estimated at each reporting date.
The recoverable amount of an asset or cash-generating unit is the greater of
its value in use and its fair value less costs to sell. In assessing value in
use, the estimated future cash flows are discounted to their present value
using a pre-tax discount rate that reflects current market assessments of the
time value of money and risk specific to the asset. For the purpose of
impairment testing, assets are grouped together into the smallest group of
assets that generates cash inflows from continuing use that are largely
independent of the cash inflows of other assets or groups of assets (the "cash
generating unit").
An impairment loss is recognised if the carrying amount of an asset or its
cash generating unit exceeds its estimated recoverable amount. Impairment
losses are recognised in the profit or loss.
3.9 Oil and gas production assets
Expenditures related to the construction, installation or completion of
infrastructure facilities, such as platforms and pipelines, and the drilling
of development wells, including delineation wells, is capitalised within oil
and gas production assets. The initial cost of an asset comprises its purchase
price or construction cost, any costs directly attributable to bringing the
asset into operation, the initial estimate of the well asset retirement
obligation, for qualifying assets, and borrowing costs.
Oil and gas production assets are depreciated using a unit of production
method. The cost of producing wells is amortised over total proved and
undeveloped oil and gas reserves of the field concerned, except in the case of
assets whose useful life is shorter than the lifetime of the field, in which
case the straight-line method is applied. Rights and concessions are depleted
on the unit-of-production basis over the total proved developed and
undeveloped reserves of the relevant area. The unit-of-production rate
calculation for the depreciation of field development costs takes into account
expenditures incurred to date, together with sanctioned future development
expenditure.
In accounting for a farm-out arrangement outside the exploration and
evaluation phase, the Group:
· Derecognises the proportion of the asset that it has sold to the
farmee
· Recognises the consideration received or receivable from the
farmee, which represents the cash received and/or the farmee's obligation to
fund the capital expenditure in relation to the interest retained by the
farmor
· Recognises a gain or loss on the transaction for the difference
between the net disposal proceeds and the carrying amount of the asset
disposed of. A gain is recognised only when the value of the consideration can
be determined reliably. If not, then the Group accounts for the consideration
received as a reduction in the carrying amount of the underlying assets
· Tests the retained interests for impairment if the terms of the
arrangement indicate that the retained interest may be impaired
The consideration receivable on disposal of an item of property, plant and
equipment or an intangible asset is recognised initially at its fair value by
the Group. However, if payment for the item is deferred, the consideration
received is recognised initially at the cash price equivalent. The difference
between the nominal amount of the consideration and the cash price equivalent
is recognised as interest revenue. Any part of the consideration that is
receivable in the form of cash is treated as a financial asset and is
accounted for at amortised cost.
3.10 Contingent liabilities and contingent assets
A contingent liability is a possible obligation that arises from past events
and whose existence will only be confirmed by the occurrence or non-occurrence
of one or more uncertain future events not wholly within the control of the
Group. It can also be a present obligation arising from past events that is
not recognised because it is not probable that outflow of economic resources
will be required, or the amount of obligation cannot be measured reliably.
A contingent liability is not recognised but is disclosed in the notes to the
accounts. When a change in the probability of an outflow occurs so that the
outflow is probable, it will then be recognised as a provision. A contingent
asset is a possible asset that arises from past events and whose existence
will be confirmed only by the occurrence or non-occurrence of one or more
uncertain events not wholly within the control of the Group. Contingent assets
are not recognised but are disclosed in the notes to the accounts when an
inflow of economic benefits is probable. When inflow is virtually certain, an
asset is recognised.
3.11 Operating lease agreements
Rentals applicable to operating leases where substantially all of the benefits
and risks of ownership remain with the lessor are charged against profits on a
straight line basis over the period of the lease.
3.12 Income tax
Income tax expense represents the sum of the tax currently payable and
deferred tax.
The tax currently payable is based on taxable profit for the year. Taxable
profit differs from profit as reported comprehensive income statement because
it excludes items of income or expense that are taxable or deductible in other
years and it further excludes items that are not taxable or tax deductible.
The Group's liability for current tax is calculated using tax rates (and tax
laws) that have been enacted or substantively enacted in countries where the
Group and its subsidiaries operate by the end of the financial period.
Deferred income taxes are calculated using the balance sheet method. Deferred
tax is generally provided on the temporary difference between the carrying
amounts of assets and liabilities and their tax bases. However, deferred tax
is not provided on the initial recognition of goodwill, nor on the initial
recognition of an asset or liability unless the related transaction is a
business combination or affects tax or accounting profit. Deferred tax on
temporary differences associated with shares in subsidiaries and joint
ventures is not provided if reversal of these temporary differences can be
controlled by the Group and it is probable that reversal will not occur in the
foreseeable future. In addition, tax losses available to be carried forward as
well as other income tax credits to the Group are assessed for recognition as
deferred tax assets.
Deferred tax liabilities are provided in full, with no discounting. Deferred
tax assets are recognised to the extent that it is probable that the
underlying deductible temporary differences will be able to be offset against
future taxable income. Current and deferred tax assets and liabilities are
calculated at tax rates that are expected to apply to their respective period
of realisation, provided they are enacted or substantively enacted at the
reporting date.
Changes in deferred tax assets or liabilities are recognised as a component of
tax expense in the Consolidated Statement of Comprehensive Income, except
where they relate to items that are charged or credited directly to equity in
which case the related deferred tax is also charged or credited directly to
equity.
3.13 Foreign currencies
Assets and liabilities in foreign currencies are translated into sterling at
the rates of exchange ruling at the reporting date. Transactions in foreign
currencies are translated into sterling at the rate of exchange ruling at the
date of the transaction. Exchange differences are considered in arriving at
the operating profit or loss.
3.14 Decommissioning
Provision for decommissioning is recognised in full on the installation of oil
and gas production facilities. The amount recognised is the present value of
the estimated future expenditure determined in accordance with
local conditions and requirements. A corresponding tangible fixed asset of an
amount equivalent to the provision is also created. This is subsequently
depreciated as part of the capital costs of the production and transportation
facilities. Any change in the present value of the estimated expenditure is
reflected in an adjustment to the provision and fixed asset.
3.15 Revenue
As described in note 5, the Group's revenue is driven by sale of natural gas
and crude oil, the goods are sold on their own in separate identified
contracts with customers. Delivery point of the sale is the point at which the
natural gas passes from our pipeline to the national grid or when crude oil
passes from the delivery tanker to the customers specified storage terminal,
which represents the point at which the Group fulfils its single performance
obligation to its customer under contracts for the sale of natural gas or
crude oil. Revenue from the production of oil and gas in which the Group has
an interest with other producers is recognised proportionately based on the
Group's working interest and the terms of the relevant production sharing
contracts.
Interest income is accrued on a time basis, by reference to the principal
outstanding and at the applicable effective interest rate.
3.16 Share-based payments
The Group has applied IFRS 2 Share-based Payment for all grants of equity
instruments.
The Group issues equity-settled share-based payments to its employees.
Equity-settled share-based payments are measured at fair value at the date of
grant. The fair value determined at the grant date of the equity-settled
share-based payments is expensed on a straight-line basis over the vesting
period, based on the Group's estimate of the shares that will eventually vest.
Fair value is measured using the Black Scholes model. The expected life used
in the model has been adjusted, based on management's best estimate. The
inputs to the model include: the share price at the date of grant, exercise
price expected volatility, risk free rate of interest.
4. Critical accounting estimates and sources of estimation uncertainty
In applying the accounting policies, the directors may at times require to
make critical accounting judgements and estimates about the carrying amount of
assets and liabilities. These estimates and assumptions, when made, are based
on historical experience and other factors that the directors consider are
relevant.
The key estimates and assumptions concerning the future and other key sources
of estimation uncertainty at the end of the financial year, that have
significant risk of causing a material adjustment to the carrying amounts of
assets and liabilities within the next financial year are reviewed are as
stated below.
Key accounting judgements
(a) Impairment of non-current asset
The Group's non-current assets represent its most significant assets,
comprising oil production assets, exploration and evaluation (E&E) assets
on its onshore site.
Management is required to assess exploration and evaluation (E&E) assets
for indicators of impairment and has considered the economic value of
individual E&E assets. The carrying amount of the E&E asset are
subject to a separate review for indicators of impairment, by reference to the
impairment indicators set out in IFRS 6, which is inherently judgmental.
Processing operations are large, scarce assets requiring significant technical
and financial resources to operate. Their value may be sensitive to a range of
characteristics unique to each asset and key sources of estimation uncertainty
include proved reserve estimates, future cash flow expected to arise from the
cash- generating unit and a suitable discount rate.
In performing impairment reviews, the Group assesses the recoverable amount of
its operating assets principally with reference to the Group's independent
competent person's report, estimates of future oil prices, operating costs,
capital expenditure necessary to extract those reserves and the discount rate
to be applied to such revenues and costs for the purpose of deriving a
recoverable value.
As detailed in note 11 and 12, the carrying amount of the Group's E&E
assets and oil and gas production assets at 30 September 2022 were
approximately £5.572 million (2021: £13.073 million) and £80.792 (2021:
£6.534 million) respectively.
The methods, key assumptions, sensitivity and possible outcomes in relation to
the calculation of the estimates are detailed in note 11.
(b) Going concern
While there can be no certainty the local authority will grant the planning
permission to the fields as described in the Strategic Report and note 11.
After making the enquiries, the Directors have a reasonable expectation that
the positive outcomes of these decision will be achieved. For this reason, the
Group and the Company continue to adopt the going concern basis in preparing
the financial statements.
As disclosed in note 3.3, the directors consider the Group and the Company to
be a going concern while the Group will continue to operate under the
management's plan and the Group expects to be able to continue to meet all
finance obligations as they fall due for at least next twelve months from the
date of approval these financial statements.
Key accounting estimates
(c) Decommissioning costs
Decommissioning costs will be incurred by the Group at the end of the
operating life of some of the Group's facilities and properties. The Group
assesses its decommissioning provision at each reporting date. The ultimate
decommissioning costs are uncertain and cost estimates can vary in response to
many factors, including changes to relevant legal requirements, the emergence
of new restoration techniques or experience at other production sites. The
expected timing, extent and amount of expenditure may also change - for
example, in response to changes in reserves or changes in laws and regulations
or their interpretation. Therefore, significant estimates and assumptions are
made in determining the provision for decommissioning. As a result, there
could be significant adjustments to the provisions established which would
affect future financial results.
External valuers may be used to assist with the assessment of future
decommissioning costs. The involvement of external valuers is determined on a
case by case basis, taking into account factors such as the expected gross
cost or timing of abandonment, and is approved by the directors. Selection
criteria include market knowledge, reputation, independence and whether
professional standards are maintained.
As detailed in note 22, the provision at reporting date represents
management's best estimate of the present
value of the future decommissioning costs required.
(d) Valuation of derivative liability
On 01 June 2021, Angus Energy Weald Basin no. 3 Limited (AWB3) entered into a
derivative agreement with Mercuria Energy Trading SA (METS) under a Swap
contract as part of the condition of the Loan Facility (see Note 25). The
derivative instrument was used to mitigate price risk on the expected future
cash flow from the production of Saltfleetby Gas Field. Under the Swap
contract, AWB3 will pay METS the floating price while METS will pay AWB3 the
fixed price on the sale of gas from the field.
The carrying value of the financial instrument approximates their fair value
and was valued using Level 2 fair value hierarchy valuation. The fair value
has been determined with reference to commodity yield curves, as adjusted for
liquidity and trading volumes as at the reporting date supplied by the Group's
hedging derivative partner, Mercuria Energy Trading. Management also assessed
the valuation of these swaps using publicly
available forward pricing curves.
(e) Acquisition of Saltfleetby Energy Limited
The group has determined the acquisition of Saltfleetby Energy Limited as
being outside the definition of IFRS 3 and therefore is not accounting as a
business combination.
5. Revenue and segment information
Currently, the Group's principal revenue is derived from the sale of natural
gas and oil. All revenue arose from continuing operations within the United
Kingdom. Therefore, management considers no detail of operating and
geographical segments information is to be reported. Nonetheless, the Group's
revenue can be classified into the following streams:
2022 2021
£'000 £'000
Sale of oil 97 -
Sale of natural gas 3,045 -
- -- - -- -- - -- -- - -- - - -- - -- -- - -- -- - -- -
3,142 -
======================================= =======================================
All the non-current assets of the Group are located in the United Kingdom. All
revenue arising from sale of natural gas is derived from sales to Shell plc
and represents over 97% of the Company's revenue.
6. Operating loss
Operating loss is stated after charging/(crediting):
2022 2021
£'000 £'000
Depreciation of owned assets 11 7
Net loss on foreign currency translation - -
Employee benefit expense 1,299 1,078
Auditor's remuneration
Fees payable to company's auditor in respect to the audit of the
Parent Company and consolidated financial statements 48 45
- -- - -- -- - -- -- - -- - - -- - -- -- - -- -- - -- -
48 45
=================== = ===================
=
Adjusted operating loss
The adjusted operating loss has been arrived at after charging/(crediting):
2022 2021
£'000 £'000
Operating loss after tax 111,947 15,598
Derivative financial instrument loss (110,309) (13,143)
- -- - -- -- - -- -- - -- - - -- - -- -- - -- -- - -- -
Adjusted loss after tax 1,638 2,455
=================== = ===================
=
7. Finance cost
2022 2021
£'000 £'000
Interest payable on convertible loan notes
78 56
Loss on revaluation of AFS investment 8 4
Other finance costs 5 1
Loan interest payment 149 -
- -- - -- -- - -- -- - -- - - -- - -- -- - -- -- - -- -
240 61
=================== = ===================
=
All interest paid under the loan payable described in note 24 has been
capitalised pre-production, in line
with the Company's accounting policies.
8. Employee benefit expense
2022 2021
£'000 £'000
Wages and salaries 1,159 971
Social security costs 140 107
- -- - -- -- - -- -- - -- - - -- - -- -- - -- -- - -- -
1,299 1,078
=================== = ===================
=
The directors received salary from the group totaling £497,000 (2021:
£494,000)
Key management are considered to be the directors. Details of each director's
emoluments are in the
directors' remuneration report.
2022 2021
Number Number
The average number of employees during the year was:
Director 5 5
Management 8 8
Operators 10 -
- -- - -- -- - -- -- - -- - - -- - -- -- - -- -- - -- -
23 13
=================== = ===================
=
9. Taxation on ordinary activities
No liability to corporation tax arose for the years ended 30 September 2022
and 2021, as a result of underlying losses brought forward.
Reconciliation of effective tax rate
2022 2021
£'000 £'000
Loss before tax
(111,947) (15,598)
Tax at the UK Corporation tax rate of 19% (2021
19%) (21,270) (2,964)
Revenue (597) -
Expenses not deductible for tax purposes 107 56
Unrecognised deferred tax 21,760 2,908
- -- - -- -- - -- -- - -- - - -- - -- -- - -- -- - -- -
- -
=================== = ===================
=
The Group has incurred indefinitely available tax losses of £173,495,965
(2021: £21,014,268), which includes tax loss incurred on the acquisition of
Saltfleetby Energy Limited, to carry forward against future taxable income of
the subsidiaries in which the losses arose and they cannot be used to offset
taxable profits elsewhere in the Group. In addition, there is approximately
£154,000 (2021: £35,000) of deductible temporary difference in respect of
the share-based payment.
No deferred tax asset was recognised in respect to these accumulated tax
losses as there is insufficient evidence that the amount will be recovered in
future years, in line with this a deferred tax asset of £376k was also not
recognised for in the money outstanding share options.
10. Property, plant and equipment
Plant and Motor Fixtures and Total
machinery vehicles fittings
£'000 £'000 £'000 £'000
Cost or valuation
At 1 October 2020 23 35 8 66
Additions 2 - - 2
- -- - -- -- - --- - -- - -- -- - --- - -- - -- -- - --- - -- - -- -- - ---
At 30 September 2021 25 35 8 68
Additions 9 6 - 15
Acquisition of Saltfleetby Energy Limited 121 32 227 380
- -- - -- -- - --- - -- - -- -- - --- - -- - -- -- - --- - -- - -- -- - ---
At 30 September 2022 155 73 235 463
- -- - -- -- - --- - -- - -- -- - --- - -- - -- -- - --- - -- - -- -- - ---
Depreciation and impairment
At 1 October 2020 14 33 8 55
Charge for the year 3 2 - 5
- -- - -- -- - --- - -- - -- -- - --- - -- - -- -- - --- - -- - -- -- - ---
At 30 September 2021 17 35 8 60
Charge for the year 8 3 - 11
Acquisition of Saltfleetby Energy Limited 110 28 227 365
- -- - -- -- - --- - -- - -- -- - --- - -- - -- -- - --- - -- - -- -- - ---
At 30 September 2022 135 66 235 436
- -- - -- -- - --- - -- - -- -- - --- - -- - -- -- - --- - -- - -- -- - ---
Net book value
At 30 September 2021 8 - - 8
======================================= ======================================= ======================================= =======================================
-
At 30 September 2022 20 7 27
======================================= ======================================= ======================================= =======================================
Depreciation of property, plant and equipment is included in administrative
expenses in the consolidated statement of comprehensive income.
11. Oil and gas production assets
Total
£'000
Cost or valuation
At 1 October 2020 7,373
Additions 128
- -- - -- -- - ---
At 30 September 2021 7,501
Additions 276
Increase abandonment provision 125
Acquisition of Saltfleetby Energy Limited 54,535
Transfer from Exploration and Evaluation assets 19,851
- -- - -- -- - ---
At 30 September 2022 82,288
- -- - -- -- - ---
Depreciation and impairment
At 1 October 2020 967
At 30 September 2021 967
Charge for the year 529
- -- - -- -- - ---
At 30 September 2022 1,496
- -- - -- -- - ---
Net book value
At 30 September 2021 6,534
=======================================
At 30 September 2022 80,792
=======================================
Saltfleetby went into production on 30 August 2022. In line with the company's
accounting policy the asset has been reclassified as an Oil & Gas
Production Asset, including assets acquired from Saltfleetby Energy Limited
As at 30 September 2022, the Group retained a 100% interest in the Saltfleetby
field, an 80% interest in the Lidsey field, an 80% interest in the Brockham
field and is still the operator of all the fields.
In assessing whether an impairment is required, the carrying value of the
asset or cash generating unit ("CGU") is compared with its recoverable amount.
The recoverable amount is determined from value in use calculations based on
cash flow projections from revenue and expenditure forecasts covering a 5 year
period. Assumptions involved in impairment measurement include estimates of
commercial reserves and production volumes, future crude oil and gas prices,
discount rates and the level and timing of expenditures, all of which are
inherently uncertain. The key assumptions used are as follow:
2022 2021
Discount rate 10% 10%
Crude oil price (per barrels) $75 $63
Natural gas price (per Therm) £1.14 -
The growth rate is assumed to be zero and the level of production is constant
on the basis the production plant is assumed to be at the most efficient
capacity over the period of extraction.
Commercial reserves are proven and probable ("2P") oil and gas reserves,
calculated on an entitlement basis. Estimates of commercial reserves underpin
the calculation of depletion and amortisation on a Unit of Production ("UOP")
basis. Estimates of commercial reserves include estimates of the amount of oil
and gas in place, assumptions about reservoir performance over the life of the
field and assumptions about commercial factors which, in turn, will be
affected by the future oil and gas price.
Annual estimates of oil and gas reserves are generated internally by the Group
with external input from operator profiles and/or a Competent Person. These
are reported annually to the Board. The self-certified estimated future
production profiles are used in the life of the fields which in turn are used
as a basis in the value-in-use calculation.
The discount rate is based on the specific circumstances of the Group and its
operating segments and is derived from its Weighted Average Cost of Capital
("WACC"), with appropriate adjustments made to reflect the risks specific to
the CGU and to determine the pre-tax rate. In considering the discount rates
applying to the CGUs, the directors have considered the relative sizes, risks
and the inter-dependencies of its CGUs. No reasonably possible change in a key
assumption would produce a significant movement in the carrying value of the
CGUs and therefore no sensitivity analysis is presented.
Furthermore, a sensitivity analysis has been carried out for Saltfleetby gas
field and Brockham and Lidsey oil fields and the results of the analysis can
be summarised as follow:
· The estimated natural gas price would need to fall by circa 30
percentage points lower than the basis assumption before an impairment of the
Saltfleetby gas field would need to be considered.
· The estimated brent crude price would need to fall by circa 55
percentage points lower than the basis assumption for Balcombe, 25 percentage
points lower than the base assumption for Brockham and 10 percentage points
lower than the base assumption for Lidsey before an impairment of the
respective oil fields would need to be considered.
12. Exploration and evaluation assets
Total
£'000
Cost or valuation
At 1 October 2020 8,183
Additions 4,890
- -- - -- -- - -- -- - -- -
At 1 October 2021 13,073
Additions 12,338
Increase abandonment provision 12
Acquisition Saltfleetby Energy Limited 54,535
Transfer to Oil and Gas Production Asset (74,386)
- -- - -- -- - -- -- - -- -
At 30 September 2022 5,572
Saltfleetby went into production on 30 August 2022. In line with the company's
accounting policy the asset
has been reclassified as an Oil & Gas Production Asset, this relates to
the £74.386m in the above note.
In performing impairment review, the Group assessed the economic value of
individual exploration and evaluation (E&E) assets and had considered no
indication for impairment to these E&E assets. In respect of Balcombe, the
Directors have considered the likelihood of a successful appeal. Should the
appeal be unsuccessful the management will consider further legal options and
assess whether an impairment is necessary. See Strategic Review on page 10.
Additional cost related to Exploration assets, which are directly attributable
to the qualifying asset that necessarily takes substantial time to prepare,
are capitalized as part of the cost of the respective asset and it consist of
interest and other cost in connection with the borrowing of the funds. In
2022, total capitalised Interest on Loan amounts to £899,000 (2021:
£475,000) and total capitalised commitment fee amounts to
£585,000 (2021: £360,000)
13. Subsidiaries
The details of the subsidiaries are as follows:
Name of subsidiary/ place of incorporation Principal activity
Angus Energy Holdings UK Limited Investment holding company
Angus Energy Weald Basin No.1 Limited Investment holding company
Angus Energy Weald Basin No.2 Limited Investment holding company
Angus Energy Weald Basin No.3 Limited* Oil extraction for distribution to third parties
Angus Energy North America Limited Dormant company
Saltfleetby Energy Limited ** Natural Gas Extraction
* indirect wholly owned by Angus Energy Weald Basin No.2 Limited (AEWB2).
**Saltfleetby Energy Limited was acquired by the Group on 24 May 2022, see
further details on Note 30.
The registered office address of the respective entity as follow:
Registered address Name of subsidiary
Building 3 Chiswick Park, 566 Chiswick High Road, London, W4 5YA. Angus Energy Weald Basin No.2 Limited Angus Energy North America Limited
Saltfleetby Energy Limited
6 South Charlotte Street, Edinburgh, Scotland, Angus Energy Holdings UK Limited
EH2 4AN Angus Energy Weald Basin No.1 Limited
Angus Energy Weald Basin No.3 Limited
14. Available for sale financial investments
2022 2021
£'000 £'000
At 1 October 28 32
Loss on revaluation for the year (8) (4)
- -- - -- -- - -- -- - -- - - -- - -- -- - -- -- - -- -
At 30 September 20 28
=================== = ===================
=
Financial investment are shares held in Alba Mineral Resources Plc (Alba)
consisting of 12,407,910 shares. The shares represents consideration received
by Angus for the disposal of Alba's 5% interest in Brockham oilfield.
The changes in the value of these investment have been determined directly by
reference to the published price quoted on AIM at reporting date.
15. Trade and other receivables
2022 2021
£'000 £'000
Non-Current
Contract debtor - derivative - 11,117
- -- - -- -- - -- -- - -- - - -- - -- -- - -- -- - -- -
- 11,117
Current
Contract debtor - derivative - 1,510
Accrued sales income 2,975 -
Amounts due from farmees 3 3,073
Rent deposit 4 -
VAT recoverable 206 218
Other receivables 919 331
- -- - -- -- - -- -- - -- - - -- - -- -- - -- -- - -- -
4,107 5,132
- -- - -- -- - -- -- - -- - - -- - -- -- - -- -- - -- -
TOTAL 4,107 16,249
=================== = ===================
=
The carrying amount of trade and other receivables approximates to their fair
value.
2022 2021
£'000 £'000
Trade and other receivables 4,211 16,353
Less: Impairment allowance (104) (104)
- -- - -- -- - -- -- - -- - - -- - -- -- - -- -- - -- -
4,107 16,249
=================== = ===================
=
In 2021 The receivables from Contract Debtors amounting to £12.627m was
recognised in the statement of financial position. It represented the 49%
share of Saltfleetby Energy Limited on the Derivative Liability as a result of
a fair value valuation on the instruments. In 2022, and due to the acquisition
of Saltfleetby Energy Limited, this has been removed on consolidation. See
also note 25 and note 30
16. Inventory
As at 30 September
2022 2021
£'000 £'000
Inventory
Acquired with Saltfleetby Energy Limited 3 -
Movements - -
- -- - -- -- - -- -- - -- - - -- - -- -- - -- -- - -- -
Total 3 -
=================== = ===================
=
Stocks Inventories held are raw materials and consumables that has been
acquired by the Group thru its acquisition of Saltfleetby Energy Limited. They
have been valued at net realisable value.
17. Share capital
Allotted, called up and fully paid:
Issue price Number of Ordinary share
In pence shares capital Share premium
Ordinary share of £0.002 each £'000 £'000
As at 30 September 2020 715,158,325 1,430 21,982
Issue of shares 3 November 2020 0.6 9,678,945 20 39
Issue of shares 23 December 2020 0.6 41,664,999 83 167
Issue of shares 27 January 2021 1.0 150,000,000 300 1,200
Issue of shares 8 April 2021 1.0 15,000,000 30 120
Issue of shares 3 June 2021 0.9429 35,000,000 70 245
Less: Issuance costs - - (148)
======= = =================== = =================== =
At 30 September 2021 966,502,269 1,933 23,605
Issue of shares 4 November 2021 0.002 11,200,000 22 -
Issue of shares 5 November 2021 0.65 115,384,611 231 519
Issue of shares 4 February 2022 0.8 175,000,000 350 1,050
Issue of shares 16 March 2022 0.8 39,200,000 78 235
Issue of shares 11 April 2022 1.1 61,363,634 123 552
Issue of shares 24 May 2022 1.09896 91,000,000 182 818
Issue of shares 24 May 2022 1.2 546,000,000 1,092 5,460
Issue of shares 24 May 2022 1.0989 273,000,000 546 2,454
Issue of shares 24 May 2022 0.9429 5,000,000 10 37
Issue of shares 4 July 2022 1.0989 273,000,000 546 2,454
Issue of shares 12 July 2022 1.0989 27,300,000 54 245
Issue of shares 13 July 2022 1.2 403,226 2 4
Issue of shares 13 July 2022 0.9 150,000 1 1
Issue of shares 13 July 2022 1.2 5,250,000 10 53
Issue of shares 5 September 2022 0.65 3,461,538 7 15
Issue of shares 5 September 2022 0.8 8,750,000 17 52
Issue of shares 5 September 2022 0.9 5,405,555 11 38
Issue of shares 5 September 2022 1.1 3,068,182 6 28
Issue of shares 5 September 2022 1.2 8,750,000 18 88
Issue of shares 5 September 2022 1.35 4,375,000 9 50
Issue of shares 5 September 2022 1.5 4,375,000 9 56
Issue of shares 13 September 2022 0.974 18,025,596 36 140
Issue of shares 13 September 2022 1.2 5,370,967 11 53
Issue of shares 13 September 2022 1.35 1,193,549 2 14
Issue of shares 13 September 2022 1.5 2,685,484 5 35
Issue of shares 16 September 2022 1 15,000,000 30 120
Issue of shares 16 September 2022 1.2 25,774,375 52 257
Issue of shares 16 September 2022 1.35 12,731,187 25 146
Issue of shares 16 September 2022 1.5 11,731,188 23 153
Issue of shares 23 September 2022 1.2 21,100,000 42 211
Issue of shares 23 September 2022 1.35 12,162,903 24 140
Issue of shares 23 September 2022 1.5 10,550,000 22 137
Less: Issuance of costs - - (512)
====== = =================== = =================== =
At 30 September 2022 2,764,264,264 5,529 38,708
On 4 November 2021, the Company agreed an extension of the £1.4m Convertible
Loan Note repayable on 17 April 2022 by a further 12 months until 17 April
2023. The Note, which was otherwise convertible at 1p per ordinary share from
17 February 2022, will now only be convertible at the earliest of 17 July 2022
representing a six month extension. Additionally, the Company retains the
right to repay the Note at any time with the additional grant of warrants at
1.3p per share as detailed in the RNS of 20 April 2020. All other terms of the
Note remain the same. In consideration for this extension the Company shall
issue and allot to the Noteholder 11,200,000 ordinary shares.
On 5 November 2021, the company issued 115,384,611 ordinary shares at 0.65
pence per share, raising gross proceeds of £750,000.
On 4 February 2022, the company issued 175,000,000 ordinary shares at a price
0.8 pence per share, raising gross proceeds of £1,4000,000.
On 16 March 2022, the company issued 39,200,000 ordinary shares at 0.8 pence
per share. The shares were used to settle litigation with a financial provider
(not being the Company's broker or Nomad) in dispute relating to the
Saltfleetby Loan Facility.
On 11 April 2022, the company issued 61,363,634 ordinary shares at 1.1 pence
per share, raising gross proceeds of £675,000.
On 24 May 2022, the company issued 91,000,000 ordinary shares at 1.0989 pence
per share. These were consideration shares paid for the acquisition of
Saltfleetby Energy Limited.
On 24 May 2022, and in relation to the acquisition of Saltfleetby Energy
Limited, the Company issued 546,000,000 ordinary shares at 1.2 pence per
share.
On 24 May 2022, and in relation to the acquisition of Saltfleetby Energy
Limited, the Company issued 273,000,000 ordinary shares at 1.0989 pence per
share, raising gross proceeds of £3,000,000.
On 24 May 2022, the Company issued 5,000,000 ordinary shares at 0.9429 pence
per share. The shares were issued to the Lenders or their representatives in
lieu of a cash facility fee pursuant to the Company's Saltfleetby Loan
Development Facility at or around the first anniversary of the Loan
Completion.
On 4 July 2022, and in relation to the acquisition of Saltfleetby Energy
Limited, the Company issued 273,000,000 ordinary shares at 1.0989 pence per
share, raising gross proceeds of £3,000,000.
On 12 July 2022, the Company issued 27,300,000 ordinary shares at 1.0989 pence
per share. The shares were fee shares relating to the Direct Subscription and
acquisition of Saltfleetby Energy Limited.
On 13 July 2022, the Company issued 5,803,226 ordinary shares at varying
exercise prices of exercise prices of 150,000 shares at 0.9 pence per share,
5,250,000 shares at 1 pence per share and 403,226 shares at 1 2 pence per
share. They were issued in relation to an exercise of Company Warrants.
On 5 September 2022, the Company issued 38,185,275 ordinary shares at varying
exercise prices of 3,461,538 shares at 0.65 pence per share, 8,750,000 share
at 0 8 pence per share, 5,405,555 shares at 0.9 pence per share, 3,068,182
shares at 1.1 pence per share, 8,750,000 shares at 1.2 pence per share,
4,375,000 shares at 1 35 pence per share and 4,375,000 shares at 1 5 pence per
share. They were issued in relation to an exercise of Company Warrants.
On 13 September 2022 the Company issued 27,275,596 ordinary shares at varying
exercise prices of 18,025,596 shares at 0.974 pence per share, 5,370,967 share
at 1.2 pence per share, 1,193,549 shares at 1 35 pence per share and 2,685,484
at 1 5 pence per share. They were issued in relation to an exercise of Company
Warrants.
On 16 September 2022 the Company issued 65,236,750 ordinary shares at varying
exercise prices of 15,000,000 shares at 1 pence per share, 25,774,375 shares
at 1.2 pence per share, 12,731,187 shares at 1.35 pence per share and
11,731,188 shares at 1.5 pence per share. They were issued in relation to an
exercise of Company Warrants.
On 28 September 2022 the Company issued 43,812,903 ordinary shares at varying
exercise prices of 21,100,000 shares at 1.2 pence per share, 12,162,903 shares
at 1.35 pence per share and 10,550,000 shares at 1.5 pence per share. They
were issued in relation to an exercise of Company Warrants.
As at 30 September 2022 the total issued ordinary shares of the Company were
2,764,264,264 (2021: 966,502,268)
18. Share-based payments
In 2016, the Group implemented an Enterprise Management Incentive Scheme
followed by a NED and Consultant Share Option Scheme (The Scheme).
At 30 September 2022, the following share options and warrants were
outstanding in respect of the Ordinary shares:
Outstanding
No. of options surrendered and exercisable as at 30
during the year September 2022
Granted during the year
Outstanding as at 01 Oct 2021 Exercised during the year
Exercise price Final expiry dates
£0.06 16,850,892 - - - 16,850,892 13 Nov 2026
£0.09 1,050,000 - - - 1,050,000 13 Nov 2026
£0.068 2,469,914 - (2,469,914) - - 15 Feb 2022
£0.0425 3,541,235 - (3,541,235) - - 30 April 2022
£0.08 10,150,000 - (100,000) - 10,050,000 24 Aug 2028
£0.02 23,900,000 - (500,000) - 23,400,000 15 Jul 2029
£0.01663 18,025,597 - - (18,025,597) - 24 Oct 2022
£0.01 15,000,000 - - (15,000,000) - 17 Apr 2023
£0.009 5,555,555 - - (5,555,555) - 29 Sep 2023
£0.015 26,000,000 - (750,000) - 25,250,000 31 Mar 2031
£0.012 75,000,000 - - (53,898,568) 21,101,432 27 January 2023
£0.0135 37,500,000 - - (26,712,639) 10,787,361 27 January 2023
£0.015 37,500,000 - - (25,591,672) 11,908,328 27 January 2023
£0.01 5,250,000 - - (5,250,000) - 9 April 2023
£0.012 7,500,000 - - (7,500,000) - 9 April 2023
£0.0135 3,750,000 - - (3,750,000) - 9 April 2023
£0.015 3,750,000 - - (3,750,000) - 9 April 2023
£0.0065 - 3,461,538 - (3,461,538) - 9 December 2023
£0.008 - 8,750,000 - (8,750,000) - 4 February 2025
£0.011 - 3,068,182 - (3,068,182) - 8 April 2025
£0.010989 - 173,100,000 - - 173,100,000 5 July 2027
Warrant 214,842,301 188,379,720 (6,011,149) (180,313,751) 216,897,121
Share 77,950,892 - (1,350,000) - 76,600,892
options
The weighted average exercise price of share options and warrants was
£0.01784 at 30 September 2022 (2021: £0.0334). The weighted average
remaining contractual life of options outstanding at the end of the year was 3
years (2021:4 years). The weighted average fair value of share option was
£0.0128 (2021: £0.0148) each on the grant date. The vesting criteria of the
share options are subject to share price growth reaching to the target level.
These fair values were calculated using the Black Scholes warrant pricing
model. The inputs into the model were as follows:
Warrant Warrants Warrants Warrants
Stock price 0.68p 0.80p 1.23p 1.32p
Exercise price 0.65p 0.80p 1.10p 1.0989p
Interest rate 0.5% 0.5% 0.5% 0.5%
Volatility 30% 30% 30% 30%
Time to maturity 2 years 3 years 3 years 5 years
The Group recognised a share-based payment charge of approximately £810,927
(2021: £182,000).
No options were exercised in both reporting year 2021 and 2022. There are
180,313,751 Warrants exercised and 6,011,149 cancelled during 2022. There
remain 76,600,892 options and 216,897,121 warrants outstanding and exercisable
as at 30 September 2022.
19. Reserves
2022 2021
£'000 £'000
Merger reserve (200) (200)
=================== = ===================
=
Merger reserve
The merger reserve arose on the acquisition of Angus Energy Holdings Limited
by the Company.
20. Earnings per share (EPS)
Basic EPS amounts are calculated by dividing the profit or loss for the year
attributable to equity holders of the Group by the weighted average number of
ordinary shares outstanding during the period
Diluted EPS amounts are calculated by dividing the profit or loss for the year
attributable to equity holders of the Group by the weighted average number of
ordinary shares outstanding during the period plus the weighted average number
of ordinary shares that would be issued on conversion of all the dilutive
potential ordinary shares into ordinary shares.
The earnings per share information based upon the 2,764,264,263 ordinary
shares are as follows:
2022 2021
£'000 £'000
Net loss attributable to equity holders of the parent
company (111,947) (15,598)
================= = ======== = =
Weighted average number of basic ordinary shares 1,648,593,936 875,710,640
================= = ======== = =
Basic EPS (in pence) (6.79) (1.78)
================= = ======== = =
The diluted loss per share is the same as the basic loss per share as there
were no dilutive potential ordinary shares outstanding at the end of the
reporting period.
21. Trade and other payables
2022 2021
Due within one year £'000 £'000
Trade payables 2,319 1,068
Convertible loan note 1,319 -
VAT payable - 22
Deferred consideration on Saltfleetby
Energy Limited acquisition 6,734 -
Lease liability 35 -
Accruals 62 231
Interest payable - loan 392 364
Other payables 293 289
- -- - -- -- - -- -- - -- - - -- - -- -- - -- -- - -- -
11,154 1,974
=================== = ===================
=
Due after more than one year 2022 2021
£'000 £'000
Convertible loan note - 1,319
Lease liabilities 52 12
- -- - -- -- - -- -- - -- - - -- - -- -- - -- -- - -- -
52 1,331
=================== = ===================
=
The carrying amount of trade and other payables approximates to their fair
value.
On 20 April 2020, the Company issued a 4% per annum £1,400,000 Convertible
Loan Note (the "New Loan Note") to Knowe Properties Limited, a significant
shareholder in the Company. The New Loan Note is unsecured and is convertible
at maturity after two years at the lower of (a) £0.01; or (b) if there is an
issue of Shares or options in respect of Shares (excluding options granted to
directors, managers or employees) by way of a single or directly related offer
to the public with an aggregate subscription amount of £250,000 or more made
without the prior written approval of the Noteholder then the price attaching
to the lowest of those issues. On 04 November 2022 the Company issued
11,200,000 shares in respect of extending the Convertible Loan Note for
another 12 months. The new maturity is 17 April 2023.
The equity element of the convertible loan note recognised is £106,000.
Alternatively, and at the Company's option, the Loan Note is repayable in part
or whole at any time up to two months before maturity with an accompanying
grant of warrants equal to the face value of the amount repaid. The warrants
are exercisable at the lower of 1.3 pence or a 30% premium to the Conversion
Price. Additionally, the Company has undertaken not to issue options to
directors or staff at an exercise price below
£0.01 during the term of the New Loan Note.
On 24 May 2022, the Company executed a share purchase agreement to acquire the
entire issued share capital of Saltfleetby Energy Limited from Forum Energy
Services Limited, giving the Company 100% ownership of the Saltfleetby Gas
Field. The total effective consideration payable pursuant to the SPA is the
sum of £14,052,000 of which up to £6,250,000 is deferred consideration and
£484,000 ,representing the debt free cash free amount, to be paid in
instalments from net cash payments to Angus Energy from the Project through to
31 March 2025 (and subject to an upward or downward net cash adjustment) as
and when those payments would have been available to Saltfleetby Energy
Limited under the Company's Senior Debt Facility of May 2021. It is expected
that all material payments with be paid within 12 months.
22. Provisions for other liabilities and charges
2022 2021
£'000 £'000
Abandonment costs
Balance b/fwd 3,007 3,007
Abandonment cost incurred through acquisition of Saltfleetby Energy
Limited 1,225 -
Increase provision Lidsey & Brockham 125
Increase provision Balcombe 12
- -- - -- -- - -- -- - -- - - -- - -- -- - -- -- - -- -
Balance c/fwd 4,369 3,007
=================== = ===================
=
The Group makes full provision for the future costs of decommissioning oil and
gas production facilities and pipelines on the installation of those
facilities. The amount provision is expected to be incurred up to 2033 when
the producing oil and gas properties are expected to cease operations.
These provisions have been created based on the Group's internal estimates and
expectation of the decommissioning costs likely to incur in the future. For
the period under review, the directors have assessed that the discount rate
and inflation rate to be applied to the current cost of decommissioning to be
similar. On this basis, the current cost is considered to be similar to the
discounted net present value.
23. Convertible loan
On 20 April 2020, the Company issued a 4% per annum £1,400,000 Convertible
Loan Note to Knowe Properties Limited, a significant shareholder in the
Company. The Loan Note is unsecured and is convertible at maturity after two
years at the lower of (a) £0.01; or (b) if there is an issue of Shares or
options in respect of Shares (excluding options granted to directors, managers
or employees) by way of a single or directly related offer to the public with
an aggregate subscription amount of £250,000 or more made without the prior
written approval of the Noteholder then the price attaching to the lowest of
those issues.
The equity element of the convertible loan note recognised is £106,000.
Alternatively, and at the Company's option, the Loan Note is repayable in part
or whole at any time up to two months before maturity with an accompanying
grant of warrants equal to the face value of the amount repaid. The warrants
are exercisable at the lower of 1.3 pence or a 30% premium to the Conversion
Price. Additionally, the Company has undertaken not to issue options to
directors or staff at an exercise price below
£0.01 during the term of the New Loan Note.
On 20 October 2021, the Company agreed an extension of the £1.4m Convertible
Loan Note repayable on 17 April 2022 by a further 12 months until 17 April
2023. The Note, which was otherwise convertible at 1p per ordinary share from
17 February 2022, will now only be convertible at the earliest of 17 July 2022
representing a six month extension. Additionally, the Company retains the
right to repay the Note at any time with the additional grant of warrants at
1.3p per share as detailed in the RNS of 20 April 2020. All other terms of the
Note remain the same. In consideration for this extension, the Company has
issued and allotted to the Noteholder 11,200,000 ordinary shares.
24. Loan Payable
On 17 May 2021, the Group signed a Loan Facility, conditional on the setting
of the hedge (see Note 25) and regulatory approval of the royalty from the Oil
and Gas Authority, between Angus Energy and Saltfleetby Energy Limited and
Mercuria Energy Trading Limited and Aleph Saltfleetby Limited as the
co-Lender. The term of the Loan Facility provides for a four year amortisation
loan facility of up to £12 million with a 12% margin over LIBOR, a 3%
commitment fee payable out of the facility, a share granted of 30 million
shares in Angus, issued over the life of the facility and an override of 8% of
gross revenue following the repayment of the facility.
The £12 million facility was required for the re-development of the
Saltfleetby Gas Field and the drilling of the side-track well in line with the
Field Development Plan and the Plans for the acceleration of production
through the fast-tracking of the side-track well.
2022 2021
Repayment date schedule were as follows: £'000 £'000
Current
30 September 2023 5,250 1,500
Non-Current
30 September 2023 - 4,200
30 September 2024 4,200 4,200
31 March 2025 2,100 2,100
Total Facility Loan £11,550 £12,000
25. Derivative Liability
On 01 June 2021, Angus Energy Weald Basin no. 3 Limited (AWB3) entered into a
derivative agreement with Mercuria Energy Trading SA (METS) under a Swap
contract as part of the condition of the Loan Facility (see Note 24). The
derivative instrument was used to mitigate price risk on the expected future
cash flow from the production of Saltfleetby Gas Field. Under the Swap
contract, AWB3 will pay METS the floating price while METS will pay AWB3 the
fixed price on the sale of gas from the field.
Due to the delay in the production of the Saltfleetby field, which further
pushed the first gas production on 30 August 2022, the hedge profile has been
revised as at 30 September 2022 as shown below:
Further details of the contract as at 30 September 2022 are as below:
Fixed price in pence per Therms
Period of Gas Production Quantity in Therms
1-Sep-2022 30-Sep-22 843,750 0.4140
1-Oct-22 31-Mar-23 10,500,000 0.5205
1-Jan-22 31-Mar-23 843,750 4.3800
1-Apr-23 30-Jun-23 5,250,000 0.3755
1-Apr-23 30-Jun-23 843,750 3.1500
1-Jul-23 30-Sep-23 4,500,000 0.3755
1-Oct-23 31-Mar-24 9,000,000 0.4655
1-Apr-24 30-Jun-24 4,500,000 0.3560
1-Jul-24 30-Sep-24 3,750,000 0.3560
1-Oct-24 31-Mar-25 7,500,000 0.4500
1-Apr-25 30-Jun-25 3,750,000 0.3525
51,281,250
As of the reporting date, the expected cash flow on the sale of natural gas
amounted to £186.332m resulting in a loss of £158.680m of which the Group
has now recorded a 100% share on its new working interest due to the
acquisition of Saltfleetby Energy Limited. The resulting loss on the Swap
contract was a result of the steep rise in the prices of natural gas affecting
the Group as the floating price payer as of reporting date.
The Group has recognized the gross liability at 100%, due to the acquisition
of Saltfleetby Energy Limited (SEL) with working interest of 49% plus the
Group's working interest of 51% prior to acquiring SEL.
The cash flow forecast for the coming years on the on the derivatives on the
accompanying
consolidated financial position as of 30 September 2022 are:
Cash Flow of Derivative Instruments 30 Sep 30 Sep 30 Sep Total
2023 2024 2025
£'000 £'000 £'000 £'000
Cash Inflow 15,829 7,127 4,697 27,653
Cash Outflow (102,412) (57,690) (26,231) (186,333)
Net Liability on Swap Contract (86,583) (50,563) (21,534) (158,680)
Specific valuation technique used to value the financial instruments includes
fair value measurement derived from inputs other than quoted prices included
within Level 1 of fair value hierarchy valuation, that are observable for the
instrument either directly or indirectly (see accounting policy for
Derivatives Instrument).
The carrying value of the financial instrument approximates their fair value
and was valued using Level 2 fair value hierarchy valuation. The fair value
has been determined with reference to commodity yield curves, as adjusted for
liquidity and trading volumes as at the reporting date supplied by the Group's
derivative partner, Mercuria Energy Trading. Management has carried out its
own valuation of the hedge using the same method. Future dated market prices
have been taken from the Heren Report dated 30 September 2022. This has
resulted in a liability of £157.124m and represents a 0.98% variance to
Mercuria's calculation. Management considered that the value provided by
Mercuria Energy Trading best represented the fair value of these arrangements
as the forward pricing curves did not take into account other market
conditions. This is a key estimate and has been disclosed in note 4.
The nature of these arrangements in the present environment is such that
material fluctuations in the value of the derivatives are occurring on a daily
basis. Wholesale gas prices have increased substantially, but remain highly
volatile, and as a result, the loss on these contracts has also increased
significantly.
The loss on these contracts at 30 September 2022 represents the forecast
spot-price value of the gas to be extracted against the value fixed to be
provided to the Group. Under projected gas production volumes, these
arrangements will fix the amount payable to the group for the contracted
volumes, with any excess of volume being able to be sold at the available spot
price.
In the event that the Group does not meet its production timetable, the swaps
will crystallise as a liability at the dates at the proposed periods of gas
production in the swap agreements.
26. Financial instruments
The Group's principal financial instruments comprise cash and cash
equivalents, trade and other receivables, derivative instruments and trade and
other payable. The Group's accounting policies and method adopted, including
the criteria for recognition, the basis on which income and expenses are
recognised in respect of each class of financial assets, financial liability
and equity instrument are set out in Note 3. The Group do not use financial
instruments for speculative purposes.
The principal financial instruments used by the Group, from which financial
instrument risk arises, are as follows:
Financial Financial Financial
Asset at amortised Liabilities at amortised Liabilities at fair value through profit and
cost cost loss
TOTAL
30 September 2022
Asset
Trade and other receivables 4,107 - - 4,107
Cash and cash equivalents 747 - - 747
Total financial assets 4,854 - - 4,854
Liabilities
Trade and other payable - 3,066
- 3,066
Deferred consideration on acquisition of
Saltfleetby Energy Limited - 6,734 - 6,734
Convertible loan notes - 1,319 - 1,319
Lease liabilities - 87 - 87
Debt financing - 11,550 - 11,550
Derivative liability - 4,175 154,505 158,680
Total financial liabilities - 26,931 154,505 181,436
Financial Asset at amortised Financial Liabilities at amortised Financial Liabilities at fair value through profit and
cost cost loss
TOTAL
30 September 2021
Asset
Trade and other receivables 16,429 - - 16,429
Cash and cash equivalents 6,160 - - 6,160
Total financial assets 22,589 - - 22,589
Liabilities
Trade and other payable - 1,068
- 1, 068
Convertible loan notes - 1,319 - 1,319
Lease liabilities - 12 - 12
Debt Financing - 12,000 12,000
Derivative Liability - 25,770 25,770
Total financial liabilities - 14,399 25,770 40,169
Capital management
The Group manages its capital to ensure that it will be able to continue as a
going concern while attempting to maximise the return to stakeholders through
the optimisation of the debt and equity balance. The capital structure of the
group consists of issued capital and external loans.
Credit risk
Credit risk is the risk that a counter-party will cause a financial loss to
the Group by failing to discharge its obligations to the Group. The Group
manages its exposure to this risk by applying limits to the amount of credit
exposure to any one counterparty and employs strict minimum credit worthiness
criteria as to the choice of counterparty. The maximum exposure to credit risk
for receivables and other financial assets is represented by their carrying
amount. As described in note 15, the Group recognised an impairment provision
of £104,000 in 2021 against the amount due from farmees that are past due in
the year.
Fair values
Management assessed that the fair values of cash and short-term deposits,
trade receivables, trade payables and other current liabilities approximate
their carrying amounts largely due to the short-term maturities of these
instruments.
Interest rate risk
The Group and company's policy is to fund its operations through the use of
retained earnings and equity. The Group exposure to changes in interest rates
relates primarily to cash at bank, loan facility and amount owed by related
parties. Cash is held either on current or short term deposits at a floating
rate of interest determined by the relevant bank's prevailing base rate.
Interest rate sensitivity
The following table demonstrates the sensitivity to reasonably possible
changes in the interest add-on rate for the £12 million loan with the
principal interest rate held constant at 12%. (Also see Note 24). The add-on-
interest rate is linked to SONIA (Sterling Over Night Indexed Average) and
based on September 2022 average of 1.85% it had an immaterial impact of £200.
Increase / (decrease)
Increase/decrease in add-on Interest rate 30 September
2022 2021
£ £
+ 10% 22 -
- -- - -- -- - -- -- - -- - - -- - -- -- - -- -- - -- -
- 10% (22) -
- -- - -- -- - -- -- - -- - - -- - -- -- - -- -- - -- -
Foreign currency exchange risks
Foreign currency risk is the risk that the fair value or future cash flows of
an exposure will fluctuate because of the changes in foreign exchange rates.
The Group's exposure to the risk of changes in foreign exchange rates relates
primarily to the Group's operating activities (when revenue or expense is
denominated in a foreign currency and the Group's net investments in foreign
subsidiaries.
The Group does not hedge its foreign currencies. Transactions with customers
regarding oil sales are denominated in US Dollars. The Group has bank accounts
in US Dollars to mitigate against the exchange risks. At 30 September 2022,
the GBP cash balance held denominated in USD was £19,869 (2021; £34,733).
Liquidity risks
The principal risk to the Group is liquidity, which arises from the Group's
management of working capital. It is a risk that the Group will encounter
difficulty in meeting its financial obligations as they fall due. This aspect
is kept under review by the directors and in this respect, management carries
out rolling 12 month cash flow projections on a monthly basis as well as
information regarding cash balances. It is the Group's policy as regards
liquidity to ensure sufficient cash resources are maintained to meet
short-term liabilities.
The maturity profile of the Group's financial liabilities at the reporting
dates based on contractual
undiscounted payments are summarised below:
2022 2021
£'000 £'000
Trade and other payable
Within one month 454 617
Within two to three months 2,612 1.357
Within four to twelve months 8,088 -
- -- - -- -- - -- -- - -- - - -- - -- -- - -- -- - -- -
11,154 1,974
=================== = ===================
=
2022 2021
£'000 £'000
Lease liabilities
Within one month - -
Within two to three months - -
Within four to six months 35 -
Within six to twelve months - -
More than twelve months 52 12
- -- - -- -- - -- -- - -- - - -- - -- -- - -- -- - -- -
87 12
=================== = ===================
=
Commodity price risk
The Group is exposed to the risk of fluctuations in prevailing market
commodity prices of oil and gas products it produces. The table below
summarised the impact on profit before tax for changes in commodity prices
Commodity price sensitivity
The analysis is based on the assumption that the crude oil and natural gas
prices move 10% resulting in a change of US$10/bbl for crude oil and GBP
0.24/Therm for natural gas sales for 2022, with all other variables held
constant. Reasonably possible movements in commodity prices were determined
based on a review of the average spot prices at each reporting periods.
Increase/decrease in crude oil prices Increase / (decrease) in profit
before tax for the year ended
30 September
2022 2021
£'000 £'000
Average spot price increased by 10% 11 -
- -- - -- -- - -- -- - -- - - -- - -- -- - -- -- - -- -
Average spot price decreased by 10% (11) -
- -- - -- -- - -- -- - -- - - -- - -- -- - -- -- - -- -
Increase / (decrease) in profit before tax for the year ended
Increase/decrease in gas prices 30 September
2022 2021
£'000 £'000
Average spot price increased by 10% 306 -
- -- - -- -- - -- -- - -- - - -- - -- -- - -- -- - -- -
Average spot price decreased by 10% (306) -
- -- - -- -- - -- -- - -- - - -- - -- -- - -- -- - -- -
27. Net debts reconciliation
The below table sets out an analysis of net debt and the movement in net debt
for the years presented
2022 2021
£'000 £'000
Cash and cash equivalent 747 6,160
Convertible loan note (note 23) (1,433) (1,433)
Loan payable (note 24) (11,550) (12,000)
Deferred consideration on Saltfleetby Energy
Limited acquisition (6,734) -
- -- - -- -- - -- -- - -- - - -- - -- -- - -- -- - -- -
Net debt (18,970) (7,273)
================================================== ==================================================
Cash and Convertible Facility Deferred Total
cash equivalents loan note Loan consideration on acquisition
of SEL
£'000 £'000 £'000 £'000 £'000
Net debt as at 1 October 2020 1,852 (1,377) - 475
Cash flow (9,818) - - (9,818)
Issue of new equity (net proceeds) 2,126 - - 2,126
Interest on convertible loan note - (56) - (56)
Facility Loan 12,000 (12,000)
Net debt as at 30 September 2021 6,160 (1,433) (12,000) (7,273)
Net debt as at 1 October 2021 6,160 (1,433) (12,000) (7,273)
Cash flow (15,427) - - (15,427)
Issue of new equity (net proceeds) 10,464 - - 10,464
Saltfleetby acquisition cost - - - (6,734) (6,734)
Facility Loan repayment (450) - 450 -
Net debt as at 30 September 2022 747 (1,433) (11,550) (6,734) (18,970)
28. Lease asset and liabilities
The Groups lease assets are offices. Leases to explore for or use minerals,
oil, natural gas and similar non- regenerative resources are outside the scope
of IFRS 16 and therefore the leases that the Group have for the various sites
are outside the scope given these leases are wholly for the purposes of
exploration and extraction from the leased land only. Key movements relating
to the lease balances are presented below.
As at 30 September
2022 2021
£'000 £'000
Leased assets
Balance 11 35
New leases in the year - discounted 97 -
Depreciation charged (27) (24)
- -- - -- -- - -- -- - -- - - -- - -- -- - -- -- - -- -
Total 81 11
=================== = ===================
=
The maturity of the lease liability are as follows:
As at 30 September
2022 2021
£'000 £'000
Leased liabilities
Balance 12 35
New Leases in the year 105 -
Payments (30) (23)
- -- - -- -- - -- -- - -- - - -- - -- -- - -- -- - -- -
Total 87 12
Leases which expire:
Not later than one year 35 -
Later than one year and not later than five years 52 12
More than five years - -
- -- - -- -- - -- -- - -- - - -- - -- -- - -- -- - -- -
Total 87 12
=================== = ===================
=
29. Commitments
At 30 September 2022, the Group had contractual a capital commitments of
£0.245m (2021 £2.973m) in
respect to the Group's Saltfleetby development activities.
30. Acquisition of Saltfleetby Energy Limited
In 24 May 2022, the Group has executed a Share and Purchase Agreement (SPA)
with Forum Energy Service Limited to acquire the entire issued capital of
Saltfleetby Energy Limited which owns the 49% working interest and the sole
project partner in one of the key asset of the Company which is the
Saltfleetby Gas Field, thereby giving the Company a 100% interest in the
project.
The total effective consideration payable pursuant to the SPA is the sum of
£14,052,000 which comprise of the following:
· £250,000 to be paid in cash at Completion;
· the issue of 91 million Ordinary Shares at 1.09896011 pence per
share (the "Funding Price") at Completion (the "Initial Consideration
Shares");
· the issue and allotment of the 546,000,000 Ordinary Shares at a
price of 1.2 pence per Ordinary Share (the ("Acquisition Price") at Completion
(the "Additional Consideration Shares"); and
· up to £6,250,000 deferred consideration to be paid in
instalments from net cash payments to Angus Energy from the Project through to
31 March 2025.
On the acquisition date, Saltfleetby Energy Limited has net asset value of
£12.581m before its share in Derivative Liability of the hedging instrument
valued at £35.228m on its 49% share as a partner.
The net asset comprises of Saltfleetby production asset valued at £15.951m,
fixed asset at £.015m and a total receivable of £2.348m while being adjusted
with payables consisting of a project related provision for plug and
abandonment of the field at £1.225m and payables at £4.508m wherein £3.566m
is being owed to a subsidiary of the Company, Angus Energy Wield Basin no. 3
and a project related cost.
The Derivative Liability is also considered a related liability arising from
the hedging of gas sales and further discussed in Note 25.
The management believes that such opportunity has arisen and being
advantageous to the company to consolidate the partners' 49% holdings on the
asset which provides a significant discount to the valuation of the
Saltfleetby Gas Field while also considering the project's progress which is
at its excellent status with all major equipment already on site and other
components in place, and with an expectation of its First Gas towards the
third quarter of the current year.
31. Related Party transactions
Amounts due at the year end to Forum Energy Services Limited is £6,734,000
(see note 21). Forum Energy Services Limited is a related party by virtue of
Paul Forrest joining the board of Angus Energy Plc on 18 July 2022 and being
the majority of Forum Energy Services Limited.
32. Subsequent events
On 13 October 2022, the Company issued 127,400,127 ordinary shares at 1.0989
pence per share. They were issued in relation to the exercise of Company
Warrants.
On 24 October 2022, the Company agreed the grant of 165.5 million share
options under the Company's existing Employee Incentive Scheme to Directors
and other staff. The share options have an exercise price of 2 pence per share
(being a premium of 23% to the closing price on 21 October 2022) and vest as
to 100 per cent., upon the closing mid‐market price of the Ordinary Shares
being 3 pence or above (being 50 per cent. above the Exercise Price. The
options have a 4 year term from the date of issue.
On 28 October 2022, the Company issued 10,193,759 ordinary shares at varying
prices of 9,100,009 shares at 1.0989 pence per share, 546,875 shares at 1.2
pence per share, 273,437 shares at 1.35 pence per share and 273,437 shares 1.5
pence per share. They were issued in relation to the exercise of Company
Warrants.
On 02 November 2022, the Company issued 36,599,864 ordinary shares at 1.0989
pence per share. They were issued in relation to the exercise of Company
Warrants.
On 21 November 2022, the Company issued 312,000 ordinary shares at varying
prices of 156,000 shares at
1.35 pence per share and 156,000 shares at 1.5 pence per share. They were
issued in relation to the exercise of Company Warrants.
On 19 December 2022 the Company announced that it had successfully raised
gross proceeds of approximately £7 million by means of a placing to certain
institutional and other investors to raise approximately £2 million, (the
"Placing") and a direct subscription to raise approximately £5 million (the
"Subscription") (together, the "Fundraising"), in each case at a price of 1.65
pence per share (the "Fundraising Price").
The Fundraising was conducted in two tranches, with the initial tranche of new
Ordinary Shares under the Fundraising (comprising in aggregate 341,219,000
Ordinary Shares, being the shares issued under the Placing and 226,219,000
shares issued under the Subscription) being issued under the Company's
pre-existing share capital authorities, and the second tranche of 89,781,000
new Ordinary Shares ("Conditional Subscription"), together with 311,250,000
warrants in respect of the entire Fundraising ("Warrants"), being subject to
shareholders passing the certain resolutions ("Resolutions") at a General
Meeting ("GM").
In addition, and conditional upon the passing of the Resolutions, Forum Energy
Services Ltd ("Forum") has agreed to accept the allotment and issue of
60,606,061 new Ordinary Shares (the "Forum Share Issue") at the Fundraising
Price (together with the issue of 30,303,030 warrants on the same basis as
applicable to the Fundraising ("Forum Warrants")) in settlement of the
Company's obligation to pay certain deferred consideration of £1,000,000 to
Forum in accordance with the Saltfleetby SPA as announced on 24 May 2022.
As announced on 2 March 2023, the Board resolved to make the following
changes, subject to final terms being agreed:
Richard Herbert has agreed to assume the role of Chief Executive Officer in
charge of day to day management of the Company and responsibility for the
ongoing development of the management team. Richard's background at the helm
of independent oil and gas companies, such as Frontera Energy, combined with
his experience as Head of Exploration at BP, his particular experience in the
UK onshore makes him the ideal candidate for strengthening the execution of
the Company's strategy. George Lucan will take up the role of Executive
Chairman with particular responsibility for stakeholder and governmental
relations and strategic direction. Andrew Hollis will remain Technical
Director of the Company but will be stepping down from his Board
responsibilities. Paddy Clanwilliam will step down as Non-Executive Chairman
to become Senior Independent Non-Executive Director, alongside Krzysztof
Zielicki, who remains our second Independent Non- Executive Director.
2022 2021
Note £'000 £'000
ASSETS
Non-current assets
Investment 5 38,632 15,336
Total non-current assets 38,632 15,336
Current assets
Trade and other receivables 6 207 101
Cash and cash equivalents 534 26
Total current assets 741 127
TOTAL ASSETS 39,373 15,463
EQUITY
Equity attributable to owners of the parent:
Share capital 8 5,529 1,933
Share premium 8 38,708 23,605
Merger relief reserve 8 1,500 1,500
Loan note reserves 106 106
Accumulated loss (14,719) (13,362)
TOTAL EQUITY 31,124 13,782
Current liabilities
Trade and other payables 7 8,249 362
Total current liabilities 8,249 362
Non-current liabilities
Trade and other payables 7 - 1,319
Total non-current liabilities - 1,319
TOTAL LIABILITIES 8,249 1,681
TOTAL EQUITY AND LIABILITIES 39,373 15,463
The loss for the Company for the year ended 30 September 2022 was £2,168,000
(2021: £1,362,000) The note on page 81 to 84 form part of these of financial
statements
The financial statements were approved by the Board of Directors and
authorized for issue on and were signed on its behalf by:
George Lucan - Director Company number: 09616076
Merger Loan
Share capital Share premium relief reserve note reserves Accumulated Total equity
loss
£'000 £'000 £'000 £'000 £'000 £'000
Balance at 1 October 2020 1,430 21,982 1,500 106 (12,182) 12,836
Loss for the year ‐ ‐ - (1,362) (1,362)
Total comprehensive income for the year - ‐ - (1,362) (1,362)
Transaction with owners
Issue of shares 503 1,770 ‐ - 2,273
Less: issuance costs ‐ (147) ‐ ‐ (147)
Grant of share options ‐ ‐ ‐ - 182 182
Balance at 30 September 2021 1,933 23,605 1,500 106 (13,362) 13,782
Loss for the year ‐ ‐ - (2,168) (2,168)
Total comprehensive income for the year - - - (2,168) (2,168)
Transaction with owners
Issue of shares 3,596 15,615 ‐ - 19,211
Less: issuance costs ‐ (512) ‐ - (512)
Grant of share options ‐ ‐ ‐ 811 811
Balance at 30 September 2022 5,529 38,708 1,500 106 (14,719) 31,124
Share capital comprises the ordinary issued share capital of the company.
Share premium comprises of the excess above the nominal value of the new
ordinary shares issued during the period.
The merger relief reserve represents the difference between the cost of the
investment in Angus Energy Holding UK Limited (initially measured at fair
value) and the nominal value of the shares transferred as consideration.
Retained earnings represent the aggregate retained earnings of the company.
The note on page 81 to 84 form part of these of financial statements.
1. General information
The company was incorporated in England and Wales on 1 June 2015 as a private
limited company. Its registered office is located at Building 3, Chiswick
Park, 566 Chiswick High Street, London, W4, 5YA.
The financial information of the company is presented in British Pounds
Sterling ("£") and rounded into
thousand (£'000).
2. Accounting policies Basis of preparation
The financial statements have been prepared in accordance with the historical
cost convention as modified by the revaluation of certain fixed assets. The
financial statements have been prepared in accordance with FRS 102 - The
Financial Reporting Standard applicable in the UK and Republic of Ireland and
the Companies Act 2006. The principal accounting policies are described below.
They have all been applied consistently throughout the period.
The company meets the definition of a qualifying entity under FRS 102 and has
therefore taken advantage of
(https://library.cch.co.uk/cch_uk/dgumfs/22%26p%3D#22.5) the disclosure
exemptions available to it in respect of its separate financial statements,
which are presented (https://library.cch.co.uk/cch_uk/dgumfs/22%26p%3D#22.5)
alongside the consolidated financial statements. Exemptions have been taken in
relation to financial (https://library.cch.co.uk/cch_uk/dgumfs/22%26p%3D#22.5)
instruments, presentation of a cash flow statement and remuneration of key
management personnel. (https://library.cch.co.uk/cch_uk/dgumfs/22%26p%3D#22.5)
Investment
Investments in subsidiaries are stated at cost less provision for impairment.
Where merger relief is applicable, the cost of the investment is recorded at
the fair value on the date of the transaction. The difference between the fair
value of the investment and the nominal value of the shares (plus the fair
value of any other consideration given) is shown as a merger relief reserve
and no share premium is recognized
Cash and cash equivalents
Cash in the statement of financial position is cash held on call with banks.
Financial assets
The directors classify the company's financial assets held at amortised cost
less provisions for impairment. The directors determine the classification of
its financial assets at initial recognition.
Creditors
Short term creditors are measured at the transaction price. Other financial
liabilities, including bank loans, are measured initially at fair value, net
of transaction costs, and are measured subsequently at amortised cost using
the effective interest method.
Taxation
Tax is recognised in the Statement of comprehensive income, except that a
charge attributable to an item of income and expense recognised as other
comprehensive income or to an item recognised directly in equity is also
recognised in other comprehensive income or directly in equity respectively.
The current income tax charge is calculated on the basis of tax rates and laws
that have been enacted or substantively enacted by the reporting date in the
countries where the Company operates and generates income.
2. Accounting policies (continued) Taxation (continued)
Deferred tax balances are recognised in respect of all timing differences that
have originated but not reversed by the Statement of financial position date,
except that:
· The recognition of deferred tax assets is limited to the extent
that it is probable that they will be recovered against the reversal of
deferred tax liabilities or other future taxable profits; and
· Any deferred tax balances are reversed if and when all conditions
for retaining associated tax allowances have been met.
Deferred tax balances are not recognised in respect of permanent differences
except in respect of business combinations, when deferred tax is recognised on
the differences between the fair values of assets acquired and the future tax
deductions available for them and the differences between the fair values of
liabilities acquired and the amount that will be assessed for tax. Deferred
tax is determined using tax rates and laws that have been enacted or
substantively enacted by the reporting date.
3. Profit for the financial period
The Company has taken advantage of section 408 of the Companies Act 2006 and,
consequently, a profit and loss account for the Company alone has not been
presented. The Company's loss for the financial period was approximately
£2,168,000 (2021: £1,362,000).
4. Staff costs
There are four employees and five directors employed by the company. The
directors are regarded as the key management and their remunerations are
disclosed in note 8 to the consolidated financial statements.
5.
Cost of Loan to group
investment undertakings Total
£'000 £'000 £'000
At 1 October 2020 228 12,602 12,830
Movement of the intercompany loan for the year - 2,506 2,506
-- - -- -- - -- -- - -- - - -- - -- -- - -- -- - -- - - -- - -- -- - -- -- - -- -
At 30 September 2021 228 15,108 15,336
Movements of the intercompany loan for the year - 7,844 7,844
Saltfleetby Energy Limited investment 15,452 - 15,452
-- - -- -- - -- -- - -- - - -- - -- -- - -- -- - -- - - -- - -- -- - -- -- - -- -
At 30 September 2022 15,680 22,952 38,632
=================== =================== ===================
= = =
Investment
The details of the subsidiary are set out in the note 13 to the consolidated
financial statements.
On 24 May 2022, the Company executed a share purchase agreement to acquire the
entire issued share capital of Saltfleetby Energy Limited from Forum Energy
Services Limited, giving the Company 100% ownership of the Saltfleetby Gas
Field.
The Company is required to assess the carrying values of each of its
investments in subsidiaries and loans to group undertakings for impairment. To
a large extent the oil & gas production assets and exploration and
evaluation assets, which have been funded by loans from the Company is
represented by the value of the operating segment cash generating units.
Recoverability of these loans is therefore dependent upon the operating
segments producing sufficient cash surplus such that the segment achieves a
positive net asset position.
6. Trade and other receivables
2022 2021
£'000 £'000
Other receivables 207 101
- -- - -- -- - -- -- - -- - - -- - -- -- - -- -- - -- -
207 101
=================== = ===================
=
7. Trade and other payables
2022 2021
£'000 £'000
Trade payables 114 121
Convertible loan note 1,319 -
Deferred consideration on acquisition of
Saltfleetby Energy Limited 6,734 -
Amounts due to group undertakings - 100
Other taxation 20 45
Other payables 62 96
- -- - -- -- - -- -- - -- - - -- - -- -- - -- -- - -- -
8,249 362
=================== = ===================
=
The carrying amount of trade and other payables approximates to their fair
value.
2022 2021
Due after more than one year £'000 £'000
Convertible loan note - 1,319
==================== ===================== ==================================
=
8. Share capital
The movement of share capital are set out in the note 17 to the consolidated
financial statements.
As at 30 September 2022 the total issued ordinary shares of the Company were
2,764,264,264 (2021 -
966,502,268).
9. Related Party transactions
Amounts due at the year end to Forum Energy Services Limited is £6,734,000
(see note 21). Forum Energy Services Limited is a related party by virtue of
Paul Forrest joining the board of Angus Energy Plc on 18 July 2022 and being
the majority of Forum Energy Services Limited.
10. Subsequent events
On 13 October 2022, the Company issued 127,400,127 ordinary shares at 1.0989
pence per share. There were issued in relation of exercise of the Company
Warrants.
On 24 October 2022, the Company agreed the grant of 165.5 million share
options under the Company's existing Employee Incentive Scheme to Directors
and other staff. The share options have an exercise price of 2 pence per share
(being a premium of 23% to the closing price on 21 October 2022) and vest
as to 100 per cent., upon the closing mid‐market price of the Ordinary
Shares being 3 pence or above
(being 50 per cent. above the Exercise Price. The options have a 4 year term
from the date of issue.
On 28 October 2022, the Company issued 10,193,759 ordinary shares at varying
prices of 9,100,009 shares at 1.0989 pence per share, 546,875 shares at 1.2
pence per share, 273,437 shares at 1.35 pence per share and 273,437 shares 1.5
pence per share. There were issued in relation of exercise of the Company
Warrants.
On 02 November 2022, the Company issued 36,599,864 ordinary shares at 1.0989
pence per share. There were issued in relation of exercise of the Company
Warrants.
On 21 November 2022, the Company issued 312,000 ordinary shares at varying
prices of 156,000 shares at 1.35 pence per share and 156,000 shares at 1.5
pence per share. There were issued in relation of exercise of the Company
Warrants.
On 8 December 2022, the Company issued 500,000 ordinary shares at varying
prices of 250,000 shares at 1.2 pence, 125,000 at 1.35 pence per share and
125,000 shares at 1.5 pence per share. There were issued in relation of
exercise of the Company Warrants.
On 19 December 2022 the Company announced that it had successfully raised
gross proceeds of approximately £7 million by means of a placing to certain
institutional and other investors to raise approximately £2 million, (the
"Placing") and a direct subscription to raise approximately £5 million (the
"Subscription") (together, the "Fundraising"), in each case at a price of 1.65
pence per share (the "Fundraising Price").
The Fundraising was conducted in two tranches, with the initial tranche of new
Ordinary Shares under the Fundraising (comprising in aggregate 341,219,000
Ordinary Shares, being the shares issued under the Placing and 226,219,000
shares issued under the Subscription) being issued under the Company's
pre-existing share capital authorities, and the second tranche of 89,781,000
new Ordinary Shares ("Conditional Subscription"), together with 311,250,000
warrants in respect of the entire Fundraising ("Warrants"), being subject to
shareholders passing the certain resolutions ("Resolutions") at a General
Meeting ("GM").
In addition, and conditional upon the passing of the Resolutions, Forum Energy
Services Ltd ("Forum") has agreed to accept the allotment and issue of
60,606,061 new Ordinary Shares (the "Forum Share Issue") at the Fundraising
Price (together with the issue of 30,303,030 warrants on the same basis as
applicable to the Fundraising ("Forum Warrants") in settlement of the
Company's obligation to pay certain deferred consideration of £1,000,000 to
Forum in accordance with the Saltfleetby SPA as announced on 24 May 2022.
As announced on 2 March 2023, the Board resolved to make the following
changes, subject to final terms being agreed:
Richard Herbert has agreed to assume the role of Chief Executive Officer in
charge of day to day management of the Company and responsibility for the
ongoing development of the management team. Richard's background at the helm
of independent oil and gas companies, such as Frontera Energy, combined with
his experience as Head of Exploration at BP, his particular experience in the
UK onshore makes him the ideal candidate for strengthening the execution of
the Company's strategy. George Lucan will take up the role of Executive
Chairman with particular responsibility for stakeholder and governmental
relations and strategic direction. Andrew Hollis will remain Technical
Director of the Company but will be stepping down from his Board
responsibilities. Paddy Clanwilliam will step down as Non-Executive Chairman
to become Senior Independent Non-Executive Director, alongside Krzysztof
Zielicki, who remains our second Independent Non-Executive Director.
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